Monday, May 31, 2010

401k and IRA Rollovers Provide Tax-Free Business Start-Up Funding (Does this sound to good to be true?)

Have you heard of Rollovers for Business Startups or ROBS? It sounds like a great idea, except for one small problem which I will get to in a minute. With ROBS, you use a 401(k) or IRA distribution to fund a new business and avoid taxes and penalties on 401(k) or IRA distributions. The idea is to form a new corporation, set up a new 401(k), rollover the funds into the new 401(k), and then use the funds to purchase stock in the new corporation.

Sounds like a great idea doesn’t it? Here is the small problem I mentioned earlier. The IRS is examining these plans, and in October 2008 even issued a memo saying that some of these plans may violate tax law. The plans may also violate some rules affecting pensions, so the IRS and Department of Labor are working together.

Read this article posted on the Tax Prof Blog for more details.

401k and IRA Rollovers Provide Tax-Free Business Start-Up Funding

Friday, May 28, 2010

Book Review: The Four Principles of Happy Cash Flow

The Four Principles of Happy Cash Flow
By Leita Hart, CPA

Cash is king! This is a simple three word sentence, but it is very powerful, and forgetting that cash is king can have severe consequences for business owners. Business owners that do not understand cash flow can actually find themselves in the odd position of making a profit while going out of business!

Knowing that cash is important, however, is only the first step. Business owners need to know how to generate cash, and they need to know how to manage their cash once they get it. The good news is that understanding cash flow does not have to be hard.

In The Four Principles of Happy Cash Flow Leita Hart has condensed cash management into four basic principles, and she describes them in simple easy to understand terms. She demonstrates the concepts by using examples from familiar companies such as Dell and Wal-Mart, and she explains how the principles can be applied to businesses of all types and sizes. The book includes ideas for:
  • Maximizing cash balances,
  • Getting money in the door faster,
  • Managing or controlling inventory,
  • And more.

Friday, May 21, 2010

National Small Business Week

WASHINGTON - The nation's top entrepreneurs will be honored at the U.S. Small Business Administration's National Small Business Week events to be held May 23-25, in Washington, D.C. A series of events and educational forums will mark the 57th anniversary of the agency and the 47th annual proclamation of National Small Business Week.

More than 100 outstanding small business owners from across the country will receive awards while gathering for three days at the city's Mandarin Oriental Hotel. They will meet with top agency officials, congressional representatives and national business leaders. The highlight of the celebration will be the announcement of the National Small Business Person of the Year.

Men and women also will be recognized for their involvement in disaster recovery, government contracting, and their support for small businesses and entrepreneurship. Awards also will be presented to SBA partners in financial and entrepreneurial development, including best SCORE Chapter, Small Business Development Center and Women's Business Center during 2009.

The State Small Business Award Winners and recipients of the Champion and other Entrepreneurial awards are nominated by local trade associations, chambers of commerce, other business organizations and government agencies. Co-Sponsors include: SCORE - Counselors to America's Small Business; VISA; Ford; Administaff; Google; eBay; Raytheon; Cbeyond; Intuit; Northrop Grumman; Lockheed Martin; Verio; NADCO and NAGGL.

Additional information on the Small Business Week 2010 events is available at

The source for this post is a US SBA press release.

Thursday, May 20, 2010

Green is good business!

The green movement has grown tremendously, and it has become mainstream. This is a trend you need to understand. If you have been reading the business pages over the last several years, you have probably seen a lot of terms such as green building, renewable energy, and sustainability. Not too long ago, conventional wisdom said that going green cost too much. It turns out that conventional wisdom was wrong.

Green is good business!
Who knew? It turns out that it makes sense to conserve energy. Energy costs are high and going higher. It makes sense to conserve raw materials. Reduce, Reuse, and Recycle are not just buzzwords. They are tools to reduce costs. They reduce the cost of hauling away garbage and of storing garbage in land fills. Green also means using renewable resources and local sourcing. These practices can reduce costs too.

Customers like it too. As more people become aware of what it means to be green, they are demanding that the companies they do business with become green. In fact, green has gone from a niche market to mainstream. Customers may even be willing to pay more for green products.

Green has gone mainstream.
If you have any doubt, do some quick research on major corporations that have announced green initiatives. Among the companies that are going green are CSC, BP, GE, Marriott, Verizon, Wal-Mart, and more. Local governments across the country are announcing green initiatives.

What does this mean for your business?
The growing green movement is an opportunity for you. You should think about doing two things.
  1. Understand what it means to be green.
  2. Figure out how to satisfy your customers' desire to be green.
Understand what it means to be green.
Understanding what it means to be green is both easier and more difficult than you might imagine. There is a lot of really bad information floating around. Get your information from a variety of reputable sources. One place that you can start is on my Help being green blog. There are a lot of resources posted on the right side of the page.

Don't be afraid to ask questions, and be assured that you know more than you realize. You will learn that a lot of things that have to do with being green are pretty simple.

Figure out how to satisfy your customers' desire to be green.
This could be as simple as letting your customers know about  your green practices. However, depending on the type of business you have, you may also want to evaluate your product mix. Leaning what your customers want may be a challenge, but you can begin by looking at approaches used by other businesses. In addition, if your customers know you are thinking about going green, some of them will be happy to tell you what they want. Ask them.
Remember that conventional wisdom that going green cost too much? It turns out that not going green might cost you even more.

Wednesday, May 19, 2010

Slow Money

Have you heard of Slow Money? Does it even make sense to you? Modern life is supposed to be fast paced, and business is supposed to be about getting deals done. If we even think of the speed of money, then we think back to introductory macro economics courses where the professor droned on and on about velocity of money, and faster was supposed to be better. The Slow Money movement has been around a while, and it has been building slowly. (How else?) It is a trend small business owners need to understand.

So what is Slow Money?
According to John Tozzi, in his post Big Ideas for 2010  on the Successful Entrepreneur Blog, Slow Money is an example of two emerging ideas:
  1. New ways to finance social ventures
  2. Local capital markets
Tozzi in an earlier article, Slow Money, Local Business, and Social Capital, described the slow money movement and observed:
The emerging model involves several trends we’ve been tracking for a while: crowd funding, community development capital, buy local movements, and for-profit social enterprise.
The idea behind Slow Money is that people ought to do business where they live and eat and work and play. In many ways, the movement is a reaction against growing globalization. In addition, people are beginning to question whether it was a good thing to replace family farms with giant industrial agriculture factories.

This is what the Slow Money Alliance has to say on their website.
Slow Money's mission is to build local and national networks, and develop new financial products and services, dedicated to:
  • investing in small food enterprises and local food systems;
  • connecting investors to their local economies; and,
  • building the nurture capital industry
What might this all mean to you and your business?
The values that are the foundation of the Slow Money movement are embodied in the belief that people are part of a place. That belief is not at odds with the idea that individuals are part of a broader national or even global community, but it does question whether bigger is always better and whether the constant search for cheaper and faster is worth the tradeoffs in quality that sometimes occur. The many “shop local” movements springing up around the country are evidence of a desire for the things the Slow Money movement describes. So too are the twin movements to reclaim small town America and to create livable cities. Small villages and towns all over the United States died as large corporations displaced locally owned stores agribusiness took over family farms. It is up to small business to get back into the marketplace. In many places, as people rediscover small town or village life, some of these places are coming back to life. This is not just a rural or suburban movement. In cities, corner grocers and soda fountains and drugstores with lunch counters were displaced by giant chains. Today, however, locally owned stores are returning.

The reason that this is important for small business owners is that locally business is small business. The Slow Money movement is all about supporting small business and “connecting investors to their local economies.” You need to know all about Slow Money, because Slow Money is all about you.

Tuesday, May 18, 2010

Two Rules for a Successful Presentation

I ran across some great advice on the Conversation Blog of the Harvard Business Review. The post was Two Rules for a Successful Presentation Since small business owners frequently give presentations, it seemed worth repeating. What? You say you never give presentations? Think again. Business owners give presentations every time they talk to their customers or their bankers.

The rules by Nick Morgan, the President of Public Words Inc, are simple.
Rule One: Know Thy Audience.
Presentations are about their audiences, not their speakers. Before you write anything down, or commit anything to a Power Point slide, you must give some thought to your listeners.
This applies to more than presentations a the Rotary or Lions Club. The same thing applies whenever you talk to a customer. You have to understand the customer's needs before you can understand how to meet them and how to make the sale.

It is even harder to apply the lesson when talking to a banker about a loan. Business owners want to talk about their plans and why they need the money. All of that is important, but why it is important becomes obvious in the context of "Know Thy Audience." The banker wants to know that he will be paid back. So when you make your presentation asking for a loan, remember why you are talking about your business.
Rule Two: Tell Them One Thing, and One Thing Only
This is a difficult rule for most presenters to follow. But it's essential. The oral genre is highly inefficient. We audience members simply don't remember much of what we hear. We're easily sidetracked, confused, and tricked. We get distracted by everything from the color of the presenter's tie to the person sitting in the next row to our own internal monologues.
This one, according to Morgan, is difficult. When speakers get up in front of an audience, they want to talk about everything they know. We've all been to presentations where the speaker keeps listing so many examples that we forgot the original point.

These two rules presented by Morgan should remind us of a couple of other public speaking terms. WIFM and KISS. Keep in mind that your audience often has a simple question, and you can give them the answer. The question? "What's In it For Me?" When you give them the answer Keep It Short and Simple.

Click on the title to read the origninal post by Nick Morgan.

Wednesday, May 12, 2010

Book Review: Younger Next Year

Younger Next Year: A Guide to Living Like 50 Until You're 80 and Beyond
By Chris Crowley and Harry S. Lodge, M.D.

I was skeptical when I first heard about this Younger Next Year. There are so many books about healthy lifestyles or dieting or exercise, I’m not sure the world needs more. I’ve also grown weary of every new age bit of hocus pocus that seems to show up on the best seller list and talk show circuit. The guides supposedly based on medical research are not any better. One day caffeine is bad, so we are all supposed to give up coffee and tea, and then the next day it is good. Alcohol used to be bad, now wine is good. As far as food types go, choose your poison: carbohydrates, fats, or protein. It was refreshing to read a book that distilled it all down to something simple, “Quit eating crap!” Then to top it off, the authors continue to tell it like it is by reminding us that we really do know what is good to eat and what is not. They also remind us that deep down inside our genes, we know we need to get moving. We just weren't made to sit on the couch in front of the TV all the time.

Younger Next Year is a great book. It is not just another diet or lifestyle book. It will give you something to think about. It was fun to read.

I heard about this book on a cross country skiing and camping trip in the Boundary Waters Canoe Area Wilderness in Minnesota. I’m fairly active, so wandering about on the lakes and in the woods of the North Woods is fun for me. One of the people on the trip mentioned the book, and it sounded interesting.

The basic premise is that our whole understanding of aging is bunk. We seem to have this idea that people begin some sort of downhill slide sometime before they reach 50. Then when they reach 50, their bodies really begin failing so that life is really a gradual and pathetic descent into painful decay. Upon reaching retirement people can look forward to a feeble existence living out their days in a nursing home. Look around. That’s just not true for everyone. It is not even true for most. Sadly it is true for too many. It does not have to be this way.

Chris Crowley and Harry Lodge got the idea for the book after Chris went to Dr. Lodge for a checkup after retiring. Like many people, Crowley needed to make a few adjustments to his lifestyle. Unlike many people, he really listened when the doc gave him the news. It turns out that many of the things that we think of as normal aging are actually the result of our behavior. The majority of illness, it seems is caused by our modern lifestyle. A few simple ideas can help us stop and even reverse that “normal” decline. In the book Chris describes his story in an entertaining fashion. Harry explains the science behind what Chris says. It is sometimes thoughtful and often witty. Neither of them pull their punches.

The book leaves the reader with a solid take away. The basic guidelines are all wrapped up in Harry’s Rules. There are seven of them. I’ll list them here, but you will get a lot more out of them if you get the book and read as Chris and Harry describe them. If you want a preview, then check out their website. The book has turned into quite a sensation. Chris and Harry now have a website, blogs, and even speaking engagements.

Harry’s Rules
  1. Exercise 6 days a week
  2. Do aerobic exercise 4 days a week
  3. Do strength training 2 days a week
  4. Spend less than you make
  5. Quit eating crap
  6. Care
  7. Connect and commit
Check out the book. No matter how old you are today, 30, 40, 50, 60, 70, or more, you can be younger next year. By the way, the guy that told me about the book was retired. He said that trips like the winter camping trip we were on was part of how he stayed young.

Tuesday, May 11, 2010

Angie’s List and Yelp: How to make consumer sites work for you

Just when you thought that you had the Internet all figured out along comes something else for you to worry about. If you have a website, you have probably already heard about search engine optimization, also known as SEO. You may have already explored using widgets such as Add This. You’re blogging, tweeting,  and Facebooking.  You are Linked In.  What else is there to do?

How about getting back to basics? Build your reputation. You can do this by understanding and using consumer review sites. Two popular Internet services are  Angie’s List and Yelp.

Both sites provide customer reviews of merchants and service providers. Angie’s list has a small membership fee, Yelp is a free service. They are not the only review sites, but they are two of the most well known. Yelp began in San Francisco in 2004, and according to their site, subscribers have written over 10 million local reviews, and over 31 million people visited Yelp in a 30 day period. Yelp can be accessed from just about any device with Internet access, and it was listed in a Time magazine article, 10 Essential Websites.

Angie’s list has been providing reviews since it was started in Columbus, Ohio in 1995 by Angie Hicks. Angie’s List groups customer reviews by service and location. The small membership fee provides access to local reviews on, live support, Angie’s List magazine, access to a complaint resolution team, and product discounts.

Why this is important to you and your business 
More and more people are using consumer review services such as Angie’s List and Yelp, and the recommendations are powerful. More than a million belong to Angie’s list, and Yelp gets more than 31 million visits a month. That is a lot of people. Word of mouth reviews have clearly moved beyond friends talking to friends. Whether you do a great job or a lousy job, people are likely to talk about you on consumer review sites.

Carpe Diem! 
If you understand the power of consumer reviews, you can make them work for you. Here’s how.
  • Don’t bother trying to game the system
  • Understand your customers and your business
  • Deliver the goods
  • Ask for referrals
Gaming the system
This is a loser’s game. The reputable consumer review sites work hard to present unbiased reviews. You can try to join the sites and review your own business, but you will probably get caught. Besides, if need to write your own review to get a good one, then you have bigger problems than a customer review site. It is a good idea to look yourself up on the sites so that you can see what your customers think of you.

Understanding your customers and your business
The key to good reviews is happy customers, and the key to happy customers is knowing what they want and giving it to them. A couple of buzzwords that you should know are “customer value” and “branding.” A customer value is simply the reason that customers buy a product. What value do customers see in your product? What are you offering? What is your "value proposition?" Branding is how you present yourself based on what you offer. Unless the goods or services you sell are inferior to others at similar price points, then the most likely cause of customer dissatisfaction is that what you say your offer, your brand, does not agree with what your customers want. Consider this extreme example.

A farmer went out to buy a vehicle and asks the salesman for the best he has. The farmer has a lot of money, so price is not a consideration. A few weeks later the farmer returned to the salesman complaining that he had been sold a piece of junk. When the salesman asked what was wrong with the Ferrari,  the farmer replied that it got bogged down in the field and there was no place to hook up the seed spreader.

If your customers want tractors, do not try to sell them fine Italian sports cars! A popular theme in sales is “consultative selling.” The idea is that salespeople should work with customers to identify their wants and needs and then demonstrate how the products meet those. This is different from the usual approach salespeople use when calling on customers to pitch their wares. Check out this blog post by Jill Konrath, Sales Classics: Why You Must Go Into Sales Calls Totally, Stark-Raving Naked for another take on the topic.

Deliver the goods
Assuming that you understand what your customer wants and that you have it, close the sale. Then deliver the goods. Your sale was a promise. Keep it. This means doing:
  • What you say you will do
  • When you said you would do it
  • At the price you agreed
If you read through reviews on Angie’s List, two things will become obvious fairly quickly. A lot of companies do not do what they said they would do when they said they would do it for the agreed price, and customers are actually surprised when companies do keep their promises. If you want the best reviews, you will have to do more, sooner, and for less than expected. However simply doing what they promised to do appears to yield good reviews also.

Ask for referrals
This advice has been around for a long time, and it works. Ask your customers to tell other people about you. Ask them if they belong to consumer review sites such as Angiel's List and Yelp. If they do, ask them to write about you. If you have done well by them, then they will do well by you.

So, how can you make consumer sites work for you? Find out what your customers want. Keep your promises, and ask your customers to tell their friends about you.

Saturday, May 8, 2010

Borrowing money for your business

All businesses borrow. They need cash for operations, and they need cash to invest in assets so they can build the business. Businesses can get the cash by they need by making a profit. However this may not be enough for growth.

Generally speaking, businesses borrow for one of three basic reasons. They need money to:
  • Get started
  • Grow
  • Smooth out cash flow
When you started your business, you may have borrowed from family or friends. You may have used your credit cards. It could be that your business is a professional services business, and you were able to start small with just a few clients, and it really did not take much money to get started. Perhaps you turned your hobby into a business. Now you’ve reached the point that you need some money to get to the next level. Maybe you are an attorney and you are ready to hire a paralegal. Maybe you need a new lathe for your woodworking shop, or a new delivery van for the catering business. What do you do?

Good news! Even though you have heard all of the bad news about tight credit, there are plenty of things you can do to make it easier to borrow money. There are only two things you have to know.
  1. Know yourself and your business.
  2. Know your banker.
Know yourself and your business
You need to know about yourself and your business for two reasons. You need to be able to make good plans, and you need to be able to present those plans to whoever is going to lend you money. Give your CPA and bookkeeper a call and get a copy of your most recent financial statements. While you are at it, get copies of the previous few years. Look at everything and not just the P&L. If you don’t understand financial ratios, ask your CPA to explain them. The ratios are tools that you can use (and your lender will use) to evaluate the relationship between your debt and your assets, how much debt service you can handle, how you manage your cash flow, and whether your business is profitable. If you are a sole proprietor or a partnership, you will also want to review your personal financial situation. If you are not sure how to prepare your own personal financial statements, ask your CPA or bookkeeper for help. You should expect to pay a fee for these professional services, but trying to save a little in the beginning could cost you later.

 Once you understand your current situation, you can start working on the future. If you put together a business plan when you started your business, then this part should be easy. All you have to do is update your plan. If you don’t already have a business plan, then develop one. You can do this yourself. There are guides and templates available in many places. You can purchase planning software. You can also ask your CPA for assistance. The Small Business Administration provides a template. Another place to look for help is the Service Corps of Retired Executives (SCORE). This is a link to their template gallery.

However you develop your plan, it will contain these basic parts.
  • Summary
  • Overview of the business
  • Analysis of the market
  • Description of products
  • Organization and management
  • Marketing and sales plan
  • Financial details
With a good understanding of your business and a business plan, you will be prepared to get to know your banker.

Know your banker
What does it mean to know your banker? In this case it means a few things. Some of them may not be possible right away because they take time. Some of them you can do immediately.
  • Develop a relationship with the bank and with the people in it.
  • Get to know everything your bank can do for you.
  • Understand what your banker needs from you.
Develop a relationship with the bank and with the people in it
This should be obvious. Remember the movie, It’s a Wonderful Life. Think about the contrast between George Bailey at the Bailey Building and Loan Association and Mr. Potter. Find a bank that wants to get to know you and your business. Figure out who the George Bailey’s in your community might be, and avoid the Mr. Potters.

The other part of this is, once you find your version of George Bailey, you need to be a loyal customer. The bank will not want a relationship with you unless you demonstrate that you want a relationship with it. You should do most of your business with your new bank. You should also try to do it in person. When you walk in the door, you want the people in the bank to recognize you. Loyal customers are as important to your bank as they are to your business.

Get to know everything your bank can do for you
Many business people simply cannot imagine the range of services available at even the smallest community bank or credit union. Most people know about checking and savings accounts. They know about money market accounts and CDs. People know about loans such as mortgages, auto loans, and personal loans. However, did you know that many banks also provide merchant services? Did you know that your bank could help you install an ATM in your store for customers? Did you know that your bank can probably set up a lockbox arrangement so that customer payments can go directly to the bank and your account? Did you know that your bank can probably help with cash management tools such as zero balance accounts? If you need access to cash, did you know you could set up a line of credit instead of borrowing with a term loan? If you take the time to get to know all of the products and services your bank offers you might discover some new ways of managing your cash.

Understand what your banker needs from you
The simplest description of banking is that banks take the money deposited by some customers and lend it to other customers. They pay interest on deposits, and they charge interest on loans. They make money when the interest they charge is greater than the interest they pay. They lose money when customers do not pay back their loans. This means that your banker needs you to deposit money. Your banker also needs you to borrow money and pay it back. If you want to borrow money, you have to make the case that you will do just that.

That is why your first steps were getting your financial statements together and developing your business plan. You will need your financial statements and business plan to make your case. You will typically need the current year and the previous two or three years. Ideally your financial statements will demonstrate that you are solvent and have appropriate liquidity. They may also show how you handle payables and receivables. In short, the statements will explain your current situation and your history. If the statements reveal any serious flaws in your operations, be prepared to explain them.

Your business plan will tell the story that you hope will unfold. You will describe your company and your customers. Your plan will describe your products and why customers will buy them. It will explain your marketing and sales plans. Finally, your plan will make clear how you will use the money you borrow. This is the most important part because it will also explain exactly how you expect to pay the money back.

Thursday, May 6, 2010

Tax surprise in health care law

Now that the Health Care and Education Reconciliation Act of 2010 has passed, people are beginning to read it and find out what is in it. The bill covers a lot of territory. Like a lot of government actions, there are things to like and things to not like. One item that is just now beginning to be covered by the popular press is a new rule that will require businesses to issue more 1099's. Neil deMause wrote an article for CNN Money May 5, 2010 entitled, Health care law's massive, hidden tax change.

While businesses are already required to issue 1099's for services, they generally are not required to issue them to corporations, and they are not required to issue them for the purchase of tangible goods. The new law will require businesses to issue a 1099 whenever they purchase more than $600 of any good or service. SMC Business Councils, a Pennsylvania business group argued against the provision while it was still in committee last October. Based on a survey of their membership, SMC said that the number of 1099s filed would increase by a factor of 20 to 40, and it takes about 30 minutes to process each one. The companies responding to their survey had between one and 175 employees. The average number of 1099s they issued was 10. Based on their survey results, the average number of 1099's would go from 10 to 300, and it would take approximately 150 hours, almost four weeks to process them!Their October 28, 2009 press release included some statements about the likely effect of the new rule.
Robert Schmitt, CFO of BNI of Western Pennsylvania, commented, "I spend about half a day right now generating the fifteen 1099's I currently do. Between checking for accuracy, and updating address information, the end result will be taking blocks of time away from my staff."

Glen Maus, president of Magee Plastics, believes, "this is another undue burden on small business, in an effort to assist a government unable to effectively do its job to provide revenue."

Mark Knobil, owner of Mark Knobil FILM/TAPE, is self-employed and said, "I do not have an accounting department. I have a laptop and a copy of Quicken. I am already drowning in paperwork."

C. T. Forster, vice president, Beaver Valley Alloy Foundry, voiced the prevailing opinion saying, "This additional time and bookkeeping would be a huge burden on our office. We will also have to send our tax information to all of our customers."

Chuck Wozniak, president, Creekside Springs, LLC, opined, "Pretty soon we will need a part-time person just to handle federal and state reporting requirements. I guess this is their idea of job creation; but it adds no real value to the economy. It only saps profitability from small businesses," he said.
There is already a movement to change the rule. Representative Dan Lungren (R-Calif.) introduced legislation (H.R. 5141) repealing the requirement.

For more details on this, see my post on Help with taxes.

Wednesday, May 5, 2010

Small business and the shop local movement

Once upon a time in towns and villages and small cities all over the United States, people shopped at stores owned by their neighbors. People ate food that came from nearby farms. Do-it-yourself types frequented local hardware stores as much for the free coffee and advice as for boxes of nails. If people needed a loan, then the bank president, or at least the loan officer, knew them. Of course this was before the creation of the superstore. It is now possible to go to giant stores stocked with a tremendous variety of low cost items. We can shop for eggs and milk, and then we can step just a few isles over to shop for clothing or office supplies, or electronics or furniture, or auto parts or just about anything.

While the megastores may have big selections and low prices, they have their own price, one that is not so obvious. Grocery stores, pharmacies, banks, hardware stores, dress shops, children’s clothing stores, restaurants, and the like used to be part of the community. Now the local managers of these national and international corporations may be neighbors, but the stores themselves have no ties to the community. Decisions about our towns and our lives are made in corporate headquarters far away. The profits made by the stores are sent to corporate offices in other places. The neighborhood grocer or drug store or hardware store can’t sponsor children’s baseball and softball leagues, and they can’t donate to PTAs because they don’t exist. Neighborhood children can’t get jobs because all of those everyday low prices don’t leave enough margin to pay students to work after school. This is changing.

Get ready for the backlash
People are getting tired of shopping in huge stores. They are beginning to recognize the Faustian bargain implicit in purchasing only for low prices. People are longing for the community they lost when the locally owned stores closed. They want to know where their food was grown.

There are entire movements dedicated to the concept of “shop local.” For example in Austin, TX, the Austin Independent Business Alliance has the motto, “Local Spoken Here,” and they include this quote on their website.
Shopping at locally owned businesses puts three times the dollars into our economy. A landmark study found that of $100 spent at a local business, $45 stays in the community. But that same $100 spent at a chain store would put only$13 in our local economy. Don't give your money away, keep it in our community.
The movement recognizes that it makes sense to pay a little more for quality too. Michael Pollan, in his book In Defense of Food, observes that it might be a good idea for people to spend a little more on food if it enables them to eat higher quality food.   The idea of locally grown food is also becoming more appealing. Many consumers around the country are shopping at farmer’s markets or joining farms involved in Community Supported Agriculture (CSA). Slow Food USA is a national organization that encourages eating locally produced food. Another organization with a broader focus is the Slow Money Alliance.

Consumers are also embracing new businesses that understand the value of shopping local, high quality, and local sources. One of these businesses is Greenling is a grocery service that sells certified organic or local and sustainably produced food and delivers it to your door for free. Greenling is more than that though. Greenling embraces the idea of community and recognizes that its customers are its most valuable resource. Greenling hosts periodic get-togethers to showcase food and vendors, and it encourages customers to submit recipes or even to blog about their experience.

Food is gone as soon as we consume it, but the idea of paying more for quality for durable goods should make sense to everyone. The same concepts of paying for quality and staying local apply in other areas too. Consider buildings. The US Green Building Council (USGBC)  recognizes that using local building materials makes more sense than paying to ship supplies long distances by including local sourcing in the LEED rating system.

What does this all mean for small business?
Small businesses should benefit from this trend for one simple reason. They are the locally owned stores and businesses that consumers are returning to after their fling with the megastores. If you as a business owner want to take advantage of the trend, then you need to understand why people want to buy local, and you need to support them so that they can support you. Here are two key points.
  • Customers buy local because local businesses are part of the community: Be part of the community. Be a friendly neighbor. Learn the names of your regulars. Support community activities like PTAs, softball and baseball teams, high school sports teams and local charities.
  • Customers buy local to support the local economy: Support the local economy. Buy local. Give students after school jobs. Be an active part of the local business community.
As people continue to become disenchanted with big faceless corporations and return to local merchants, it is up to you to welcome them back and to make them glad they came home.

Saturday, May 1, 2010

Boundary Waters Blogger: A Canoe Trailer That Will Last

Jason, a friend of mine, runs an outfitting service and guide service for people taking trips into the Boundary Waters Canoe Area Wilderness. The BWCAW is a 1.09 million acre wilderness area in Minnesota. On the other side of the border is Canada's Quetico Provencial Park. He recently bought a new canoe trailer and wrote about it on his blog. Boundary Waters Blogger: A Canoe Trailer That Will Last This is what he had to say about his new trailer.
Meet one of the most durable canoe trailers available. This photo shows our six-place canoe trailer with box by Remackel Welding. As we talked with other outfitters about canoe trailers that last the longest under heavy use, we repeatedly heard about the custom trailers by Dennis Remackel. He’s been making them by hand for several decades.
Jason's business is tough on equipment. When you or I buy camping gear, we may use it a few times a year. If we buy a canoe, we may be able to take it out a few weekends, and if we're lucky, we may get to go on a week long paddling trip. Jason's clients use his gear every day of the season. He buys high quaility stuff that lasts. If he trys to save a few pennies by buying cheap stuff, it ends up costing him dollars in replacement or repair costs. I did not ask, but I know he did not make the decision to buy the new trailer from Remackel Welding without a lot of thought.

So what's the point of this discussion?
Simply that Jason runs a first class business, and he pays a lot of attention to detail. (One of these days I ought to write an article on how he got started.) That attention to detail is why he bought the trailer he did, and it is why he bought it where he did. Here's a quick list from his post.
  • Dennis gives people several options to customize their trailers."
  •  . . . the trailer is dipped in molten zinc resulting in a trailer that won’t rust and never needs painting.
  • The cool-factor is pretty high, and the practical durability factor is even higher.
  • . . . wheel wells strong enough to stand on, and a plywood step on the tongue. The plywood is all marine grade.
If I were buying a trailer, I would go to Remackel based on what Jason wrote. Knowing the nature of the guiding and outfitting business, his remarks are pretty high praise.

What about you?
Do your customers talk about you and your products the way Jason talked about his new trailer? If not, what can you do so that they will? Here are a few things to try.
  • Understand your customers and meet their needs. Remackel produces all sorts of trailers for all sorts of uses. It is not a one-size-fits-all operation.
  • Offer customization. Jason needed extra durability so he went with a galvanized finish. Other people may be just as happy with less expensive finishes.
  • Your reputation goes before you. Let it be a good one. Your customers can be your best salespeople. Offer them real value.