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42 Posts authored by: SBC Team

White-in-article.pngMany small businesses forego formal annual employee evaluations. But, you should think twice.

 

By Sherron Lumley.

 

For many small business owners, employee reviews rarely get a second thought, and when they do they all too often fall into one of two versions—“Way to go!” or “What were you thinking?” For some, their reticence to formal reviews involves the time required. For others, it’s the potential for confrontation and an uncomfortable employer-employee relationship. And then some believe they’ve already identified their top-quality and sub-standard performers, so why bother? However, the reasons for doing a formal year-end evaluation outweigh the drawbacks.

 

Performance management is the way a small business owner takes his or her goals from strategy to reality by communicating with employees. One of the most important elements of this is the annual employee evaluation. It’s a vital opportunity for feedback that promotes better teamwork by motivating and encouraging employees and offers insight for improving the business. Put simply, it aligns your day-to-day operations with the larger goals your company aims to achieve.


“Employees always want to know what management thinks of their performance,” says Harvey Baron, founder of Remantech, a custom manufacturing technology company in the Pacific Northwest. “It also lets the employer know why some departments are doing well and why others are not.” 


Callout3.pngHere is a look at three of the key objectives of the formal year-end review process:  better outcomes through two-way feedback, increased employee satisfaction and retention, and documentation of employee performance and achievements to support compensation decisions and for legal purposes.


Improving employee performance through two-way communication

“If the criticism, if any, is constructive there should be a marked improvement in the employee’s attitude and work,” says Baron. “Sometimes an employee doesn’t even know everything that’s expected of them,” he says, noting that employee evaluations are valuable because they establish measurable goals for the employees and provide an opportunity to review the job description.


And to really make the most of it, Baron recommends thinking of the review process as a two-way street.  “When I allowed my folks to also evaluate their immediate supervisor, I was able to get a more complete picture of the employees’ performance,” he says. 


Today, the big trends in evaluating employees involve comprehensive performance management and two-way communication, building commitment, and enthusiasm. It’s a way to decrease turnover, motivate self-improvement and develop trust, says Barry Silverstein in his best practices book, Evaluating Performance.

 

Increasing employee satisfaction and retention

BayView Building Maintenance employs over 80 part-time and full-time employees who provide janitorial and building services to high security commercial office and medical facilities in Oregon and Washington. The company’s high rate of employee retention is a selling feature to their security-sensitive clients, who count on seeing the same familiar service staff year-round. The employee performance evaluation process contributes to Bay View’s success by promoting a positive and rewarding environment where attractive compensation is directly linked to better performance.

 

According to founder Denise Coy, listening to the employees is important for several reasons. Not only does it tell us how they feel about their job and if they are happy, but it also lets us know if they have any questions,” she says. “It tells us if they are right for the job and if they can advance,” she adds.

 

Creating a paper trail

Discount Fabrics in San Francisco is a family-owned business founded in 1967. “For several years, things were very comfortable and business was easy,” says owner Linda Blake. “Because the stores were run by either family or people that had been with us so long they were treated like family, most employees were long-term and there were not evaluations or written schedules and very little was put into writing.”

 

But now that Discount Fabrics has grown to include three stores, many more people are working for the company and it experiences higher employee turnover. Consequently, the three-generation family business has begun conducting written performance reviews. Documented schedules, time cards, evaluations, and write-ups became a necessity.

 

“Truly I feel the written evaluations are much more helpful to management than to the individual employee,” says Blake, who says it is an important part of a comprehensive employee file, serving as a record of an employee’s performance and history with the company to support management decisions. The year-end review establishes a paper trail for legal purposes and is also used by Discount Fabrics to fairly determine employee bonuses, benefit eligibility, and compensation.

 

 

Free employee evaluation resources:

Microsoft Office Employee Evaluation template.

Microsoft Office (short) Employee Evaluation form.

Inc’s (long) Employee Review template.

SBC Team

Rainmaking From Online Clouds

Posted by SBC Team Dec 14, 2011

White-in-article-square.pngBy Sherron Lumley

 

Bringing in new clients, improving cash flow, and finding new sources of capital are a perennial challenge for every business—for small businesses even more so. But now, thanks to the Internet and social media, entrepreneurs have access to many of the same powerful marketing tools, business networks, and customer groups that were once the private domain of Fortune 500 corporations. The trick, of course, is how to use these new tools correctly.

 

The first step on this road to increased prosperity, however, often proves to be the most difficult—getting buy-in from the business owner. But according to Mitch Joel, author of the book Six Pixels of Separation, a company that foregoes its online potential is missing a big opportunity. “Use the cloud,” he emphasizes. “The Internet can and should be one of the most powerful channels to convey your ideas and thoughts.”

 

Pull-Quote-Tall.pngSo what is so different and important about tapping into groups of people gathered together online in places like social media groups?  The answer is like-mindedness, trust, and among other things, engagement—it’s the idea that these people already want to interact with you and your business. 

 

Michael Stelzner, author of the 2011 Social Media Marketing Industry Report says that over the course of the last three years, social media has moved from an uncertain strategy to a permanent fixture to, now, a primary tool of businesses of all sizes. “Almost all marketers find that social media helps them stand out in an increasingly noisy marketplace,” Stelzner points out. In fact, the study found that 88 percent of respondents said social media helps get them increased exposure. Additionally, 72 percent of those surveyed saw increased traffic and subscriptions as a result of social media.

 

Online networking

 

Malena Jackson is the founder of the Global Association of Family Travel, in Valencia, California. It’s a business she relentlessly markets through social media channels like Facebook, Twitter, and LinkedIn, as well as through traditional methods such as local Chamber of Commerce meetings.

 

While Jackson acknowledges that face-to-face customer interactions still hold more value, she remains committed to online networking even though only five percent of her business currently comes from social media contacts. Approximately four times a week, Jackson sends out Facebook, LinkedIn, and Twitter messages to her clients, which include hotels and resorts around the world who want to know more about capturing the family traveler market. “I’m always planting seeds,” she explains. 

 

She also uses YouTube and Facebook to post short, three-minute videos that touch on family travel topics and consistently communicate her marketing message. “Social media allows you to be the expert if you do it right,” she says. When it comes to interacting online, Jackson says it’s all about letting people in and having a two-way conversation with customers and colleagues. “They want to be a part of your world.”

 

Online prospecting

Stephan Laenen founded his graphic design company, Image Creation, in Atlanta 10 years ago, later relocating to the Pacific Northwest. However, like Jackson, his customers come from far and wide. And he attributes some of his recent success in connecting with potential new clients to following up on LinkedIn after real-world networking events.

 

Laenen says when people come to his business via a social media site such as Facebook or LinkedIn, they are 80 percent bought in to your business because they trust the people who referred them. That makes converting them into real-life customers that much easier, he points out.

 

“When you do cold calls or advertising, you’re throwing a lot of work out there and the customers may or may not come,” Laenen says. “By nature, I’m not a sales person, I’m more of a customer service type. It’s easier for me if they are sold already.”

 

Online funding

Crowdfunding is another innovative way for a small business to use online resources to their benefit. So how does it work?

 

According to a recent Wall Street Journal profile, these online financial aggregation sites “provide platforms for entrepreneurs to get funding from various contributors, often friends, relatives and members of their community.” Best of all, the article notes, “the funds don’t need to be paid back because they’re not loans. However, many entrepreneurs give their contributors some of the products or services their start-ups sell as a way to show appreciation.” There are now several of these sites, such as Peerbackers, IndieGoGo, RocketHub and Kickstarter that let entrepreneurs tap into like-minded souls for relatively quick cash.

 

In New York City, Charles Hobson, founder of Vanguard Documentaries, is a veteran of the documentary film making industry and of fundraising. But for his current project, a film about the historic Flatiron building in New York, he created a Flatiron Film page on Kickstarter. For various amounts starting with as little as five dollars, people could become backers of the new project and, in return, get mentioned in his film’s credits. And though Hobson fell short of his official goal of raising $25,000 in three months, he was still able to contact the nearly 50 volunteers who did sign up and get them to directly contribute more than $5,000 to help create his film.

 

Calling it an “excellent vehicle,” Hobson says he would definitely try rainmaking through online crowds again, despite his initial, mixed results. “This is a good way for you to connect with people,” he says, adding that this is especially true since “in this economy, it’s more difficult to raise money.”

In-Article.pngBy Sherron Lumley.

 

Frank DeSantis, owner of DeSantis Photography, has spent 15 years in Philadelphia and Portland building small business alliances to move his commercial photography business forward. “It’s perseverance really and it’s not instant gratification. Business is about developing relationships. I’ve always known that and been open to experimenting,” DeSantis says.  

 

The relationships he refers to amount to a series of informal collaborations, where two or more companies work together toward mutual objectives, sharing both risk and reward. Working with a core team of small business owners can create a synergy where the sum of the whole exceeds what each individual business can do on its own.

 

These alliances tend to come in three flavors. The first type resembles David-and-Goliath proportions, where a smaller company joins forces with a much larger strategic ally, with the intended benefit of adding credibility to the smaller organization. Then there are the informal partnerships between two very large, but non-competitive companies, which often come together to co-market or cross-promote each other’s complementary brands. And finally, in what might be called David/David alliances, two smaller companies, both with limited resources, come together to leverage off each other’s strengths on a peer-to-peer basis.

 

Pull-Quote.pngFor example, the traditional way to promote a business, through the channels of marketing, advertising, and public relations can be prohibitively expensive to even mature small businesses. But by teaming up with other similarly sized companies in a David/David kind of arrangement, the costs can be shared, helping the companies to overcome an otherwise insurmountable financial barrier to entry.  But it’s not just about sharing expenses and saving money, forming an alliance is also a way to strategically grow sales contacts, cross-pollinate expertise, develop new markets, gain distribution channels, and build new technology and manufacturing. 

 

Build cross-industry strategic alliances through networking

 

“Networking takes a lot of time,” says DeSantis, “and even though you may think it’s a waste of time, it’s not. Nothing will come out of it that day, but week after week, month after month you’re befriending other people in the business community and earning their trust. Eventually it comes through,” he says.

 

DeSantis has shared direct mail campaigns, web blasts, and events, as well as formed alliances with hair stylists, jewelry makers, graphic designers, web designers, printers, and marketing professionals. “Then I put myself out there to doctors, doing portraits for their websites and pictures of procedures,” he says.  Next, he is considering an alliance with lawyers. 

 

DeSantis joined Business Networking International when he moved his business from Philadelphia to Portland several years ago. “One of the people I met at that networking group refinishes floors and that led to doing photography for him that moved his business up a notch,” he says. DeSantis then joined the Oregon Remodelers Association and the National Association of the Remodeling Industry, which led to more business. “Whatever it is that you want to be doing, that is where you need to go,” says DeSantis, who specializes in architectural photography.

 

“Real entrepreneurs understand the fundamental power of networking—connecting to like-minded individuals and helping them connect to others,” says marketing expert Mitch Joel in his book Six Pixels of Separation. “You network to build your circle of influence by adding value to your community and helping others get value they want.” The idea, he says, is to become the go-to person for the community.

 

Join professional trade organizations

 

The best strategic alliances result from a cooperative culture and spirit among the participating small businesses. These bonds lead to trust, resource sharing, and a friendly chemistry among the parties, says strategic alliance consultant Andrew Sherman in Grow Fast Grow Right

 

Ken DeLoria, owner of DeLoria Technical Services, runs a professional audio business specializing in live sound for musical concerts as well as high-profile TV events such as the Super Bowl, the Grammy Awards, and the Academy Awards. “I network as much as possible to stay on the radar with event planners, production companies, and sound rental companies,” says DeLoria, who is a member of the Audio Engineering Society (AES), the professional trade organization for his industry.

 

“The pro audio business lives and dies on relationships,” DeLoria says. “Almost every day of my life I’m sharing information and contacts. It’s a never-ending thing,” he says. It’s a tactic that has served him well. “In my business, it’s a combination of being technically competent, easy to work with, likeable, skilled, and sharp that results in trust and confidence in our advice on a major sound system that will cost millions of dollars,” he says.

 

Co-promotion can be a fast track to brand recognition

 

Establishing brand awareness can seem like a daunting task for small businesses, but those companies aiming for rapid growth can defray the heavy costs involved by sharing the expense with other businesses. “Strategic alliances bring added value, economies of scale, and broader customer recognition to the small business involved,” writes Sherman.

 

For instance, 17 years ago, DeLoria expanded his business from sound production to designing custom sound systems, which he commonly promotes at major industry trade shows across the country. But he found that shipping these large pieces of sound equipment—which often require a semi truck to accommodate them—can run as much as $30,000 or more. Thanks to the strategic alliances he’s since built with industry manufacturers, however, he’s able to defray these costs by using the sound equipment they already have on-site at the trade shows. DeLoria then cross-sells those same equipment brands in his trade show pitches, lending those products an air of being an expert’s choice.

 

Does an alliance require a contract?

 

For informal business alliances, a binding legal document might not be necessary, although talking over the arrangement with a lawyer is nonetheless a good idea as he or she may point out unforeseen consequences of the venture. However, if your company will be licensing the use of its patents, trademarks, or intellectual property rights and, conversely, if your business will be promoting those same rights from another business, the American Bar Association recommends seeking legal counsel. Of course, for formal business alliances, such as joint ventures or partnerships, it’s a must to have a thorough legal review and to put any agreement in writing, where it should be spelled out to all parties what is being shared and what is not, and how the process for exiting the alliance will work. And if strategic alliances, even informal ones, lead to doing business in other states or countries where you’re unfamiliar with the local laws and regulations, it’s a good idea to talk to a lawyer as well.

White-in-article-portrait.jpgBreakeven Analysis, Pro Forma Forecasting, and Growth Strategy.

 

by Sherron Lumley.

 

New Yorker Douglas Tausik is thinking outside of the box. In 2007, he founded Tropix Technology, a business that sells laptop computers to the East African market, specifically in Uganda. His big idea came from a visit to the area and a discovery that fewer than two percent of the Ugandan population owned a computer. “Our ultimate goal is to provide doctors, teachers, and students with computers,” says Tausik.

 

So far, Tropix has sold 50,000 computers in Uganda, a good start toward bringing computer literacy to the country via affordable computers that are made in China. To stay on track, Tausik relies upon several financial planning tools to help him answer three vital questions that every small business owner must ask:

  1. Will the business be able to make money?
  2. How long will it take until it’s profitable?
  3. How will I know if the business is meeting its goals?

 

Breakeven analysis, forecasting, and cash flow projections—these are the things small business dreams are made of. Each tool provides a strategic starting point for making the envisioned future a reality.  

 

Breakeven analysis

In Tropix Technology’s case, profit expectations and expenses are kept to an absolute minimum in order to make the computers affordable to Ugandans, lowering the breakeven point. To break even is a simple enough concept: at a certain point, expenses will be covered and the business will start to make money. Breakeven analysis means calculating all expenses the business incurs and determining how much product or service must be sold and at what price to make a profit.

 

For Tropix Technology, one of the main expenses is providing after-sale service and repair in Uganda, a benefit that has never been available before. “We had to analyze how many units to sell per month to operate the service center,” says Tausik. Some of the elements that go into a breakeven analysis include raw materials, labor, utilities, fuel, marketing, fixed costs such as rent, and variable costs such as shipping, selling expenses/sales commissions, and taxes.

 

The U.S. Small Business Administration (SBA) offers a link to preparing a break-even analysis provided by Nolo.com, a legal publisher in Berkeley, California. Nolo also provides information on its website on preparing a profit and loss forecast, a cash flow projection and estimating start-up costs.

 

Pull-Quote.pngPro forma forecasts and cash flow

“We are definitely involved in forecasting and do cash flow projections,” says Tausik. “We have to fund the manufacturing of the computers, then we have to ship, then collect funds, so we have to analyze the cash requirements. Our commitment is never beyond the actual shipment because we do not do the manufacturing. We gather the orders, then when we have enough, we place the order in China,” he says.

 

 

The Latin term pro forma (as a matter of form) in business means projecting the future status of the company based on current performance, without including unusual and non-recurring transactions. Pro forma financial statements are similar to regular financial statements, except that they are educated guesses of what will happen in the future, based on the goals of the company and what is known right now. A pro forma balance sheet will include assumptions of future cash flows, assets, and liabilities. A pro forma income statement includes expected sales revenue, cost of goods sold, losses, operating expenses, equipment, depreciation and taxes. A pro forma statement of cash flow will predict inflow and outflow of cash to the business and give insight on potential shortages.

 

Realistic pro forma forecasts can be helpful to a small business by providing insight into needed course corrections. To make a forecast with any degree of accuracy, some actual data is needed, such as prior revenues and expenses from a known period of time. Typically, three to five years of data is considered a healthy period for discovering trends, but when the market is in mid-swing, a shorter time span may be more appropriate.

 

 

Growth Strategy
Just two years ago, Internet service became available in Uganda via a high-speed optical service built by China. The Internet Service Provider (ISP) sector is growing slowly, but in time will develop Internet access for more Ugandans, the majority of whom are still subsistence farmers. With this in mind, Tropix has plans for expansion. “It is an underserved market,” says Tausik. “Currently 30 to 35 percent of the population work in non-farming professions,” he notes, “and there is already reliable Internet service available in the capital city of Kampala.”

 

Tropix’ initial sales to the civil service sector was met by great enthusiasm from the Ugandan government, which provided a sales office for the company at no cost. Now, attention is focused on the country’s doctors and teachers, with a goal of 80 percent computer ownership. Additionally, there are thousands of incoming Ugandan university freshmen each year with no computers, so students will be an important target market as well. To reach the 80 percent goal the company will need to sell a total of 400,000 computers over the next five years. “We forecast the amount we have to sell each year to reach that goal and then make a marketing effort that corresponds to that,” Tausik explains. Part of the marketing effort is mobilizing a group of teachers to go from school to school.

 

Becoming familiar with breakeven analysis and pro forma forecasting is essential to meeting small business goals. With the knowledge of expenses and sales, a small business can calculate its breakeven point, forecast future cash flow, plan for profit, and create a growth strategy.

 

 


 

Additional Resources

The U.S. Small Business Administration (SBA) provides a free online business planning course and business plan template that includes breakeven analysis, pro forma cash flow and a full list of items to include in a complete business plan. To learn more, follow the links below to other online resources.

  • A breakeven analysis will show you where your company begins to make a profit.
  • The breakeven point determines whether expenses, sales, or prices need adjustment.
  • Cash flow projections help prepare for shortages that can derail a small business.
  • Forecast realistically by using recent data considered in the context of the current market.
  • Pro forma calculations have many uses beyond the initial business plan, including planning for strategic growth.

Whether your business leans toward luxury or low-cost, setting the right price for your products is critical to success.

 

by Sherron Lumley.

 

In the exclusive realm of artisanal furniture, Steven Garfield, owner of Steven Garfield Fine Furniture in Stanton, New Jersey, is among the most elite in the country. “When you’re dealing with luxury, it has to be as perfect as humanly possible,” says Garfield, who is currently working on a custom dining suite for the Johnson family, of Johnson & Johnson fame, a commission that “could be in the $100,000 range.”

 

Pull-Quote.pngStill, even in such a high-end market, Garfield acknowledges his company is not immune to robust discussions about price points. “We debate it all the time,” he says. Perhaps that’s not surprising since hanging a price tag on a one-of-a-kind piece of custom furniture can be difficult. “I don’t like to think about money,” he says, but it’s a necessary evil for someone who admits with a chuckle that “if I were to keep a time log, there are times I would be making less than a dollar per hour.”

 

“Most of a business’s customers are relationship or value-based, but by focusing mainly on price, you run the risk of converting them to price-based customers,” explain price consultants Reed Holden and Mark Burton in Pricing With Confidence: 10 Ways to Stop Leaving Money on the Table. The authors urge that companies consider value-added pricing, which focuses on the total value delivered to the customer, rather than more traditional cost-plus pricing, which tallies the cost of the product plus a set mark-up.

 

Whether operating in an upscale or cut-rate market, getting the price right can make or break a small business. A price strategy is step one in getting to that profit sweet spot, the point that keeps customers happy and demand high, while still stoking business growth. Each business is unique, and strategies must be tailored to demand, the market, competitors, customers, perceived value, actual value, and cost. A look at three strategies for small businesses follows: premium pricing, competitive pricing and product differentiation.

 

Premium pricing

 

There are a limited number of pieces that Garfield and his staff can create in a year. The furniture is made from old-growth trees that have fallen naturally at the end of a 100 to 200-year life span. Each piece is handmade in a process that can take several years.

 

“I feel more confidence in the higher price point. A life is going into it,” says Garfield.

 

Premium pricing is appropriate when there is something unique about a product or service, and luxury, exclusivity and high quality are all associated with perceived higher value. Premium pricing strategies may mean a longer sales cycle, but better margins and higher profits will result from a smaller revenue base.

 

CFinding_Price.pngompetitive pricing

People are more price-sensitive about the necessities of life and less price-sensitive about the niceties. Whereas fine furniture is a luxury, children’s clothing is a necessity. On the other side of the country and the other end of the price point scale, Cristina Berry is the owner of Pipsqueak Resale Boutique, in Vancouver, Washington, a name-brand children’s clothing resale shop. Baby and children’s clothing at Pipsqueak starts at $1.50 per item and peaks at $15.00. The store also carries new and resale baby gear such as strollers, mobiles, and bouncers.

 

“I’m a mom of two kids and I know the economy is tough right now,” Berry says, “You have to be priced right or customers will go somewhere else.”

 

The more competitive the industry, the less flexibility there is on price. Even so, having the lowest price is not necessarily the best strategy. Finding the right price point starts with evaluating the competition based on the full package of products and services offered.

 

“Compared to our competitors we are low to medium priced,” says Berry. “We add value by offering better quality and service.” The merchandise at Pipsqueak Boutique is put through a triple-check process including steaming and sterilizing before stocking the sales floor, something her customers know about and appreciate, she says.

 

Customer care is another way to add value. “I want people to know that I care, and hope they will get a more personable feeling when they come into my store than they would at a larger competitor,” she says.

 

“If your product is a necessity, you need to focus on the value of your product compared to your competitors,” writes Laura Lake in her book, Consumer Behavior for Dummies. “You need to prove why consumers should spend their hard-earned money to purchase your product rather than your competitors.”

 

Product differentiation strategy

“You want to be sure that the market you’re targeting has the buying power to purchase your product,” Lake writes in her book. “When evaluating buying power within your target market, consider providing several quality levels of the same types of products that match the buying power and the demand in a given sector of the market.”

 

By carrying both new and used items, Pipsqueak’s is, in effect, pursuing a differentiation strategy, offering products at different price points.

 

The differentiation strategy applies to luxury goods as well. For those who admire his work but are not prepared to drop six figures on fine furniture, Garfield has more attainably priced pieces in the collection starting at $7,500 for tables and $1,500 for chairs.

 

White-in-article.jpgPrice testing

It’s not always the lowest price that pulls the best sales. But how do you find that perfect price point if your business isn’t a discount house or a premium outfit? Sometimes no amount of pencil-to-paper calculations or estimates of customer perceived value will lead to a specific best price. At this point, some actual information is needed—real data, not just theory. Testing different prices to discover what customers are willing to pay is the purpose of conducting a price test.

 

In an ideal price test, identical items would be priced differently at the same time in the same market to discover which price delivers the best results, but in a solo retail shop, this isn’t going to work. The next best scenario is to use different prices on similar pieces of merchandise. For small businesses selling online, the new era of real-time Internet pricing, where prices can change from minute to minute, makes online sales the ideal testing ground.

 

The price is right

Once the right price has been established, stand firm. “There is only one way to present your price,” says Tom Reilly in Value-Added Selling. “Use these three words only: ‘the price is…’ Anything other than that creates doubt in the buyer’s mind,” he says, adding, “The time to exude complete confidence is when you’re asking people for money.”

in-article.pngBy Sherron Lumley.

 

Even though a business might be considered small because of its relatively tiny staff, it can still have grand ambitions in today’s global marketplace. Just ask Mark Hilden, president of Dateline Exports. His company, based in the small, rural town of Aurora, Oregon, only employs 18 people, yet it nonetheless exports steel, timber, electrical materials, lighting, and underground utility piping to island countries spread all across the Pacific Ocean. “Our territory is anywhere beyond the International Date Line,” Hilden says.  Increasingly, other entrepreneurs are sharing Hilden’s strategy of selling his small business’s wares on a large, geographic scale. In fact, according to the Small Business Administration (SBA), 70 percent of all U.S. exporters have 20 or fewer employees and small businesses now account for more than $1 billion, and growing, per day in exports. 

 

Small businesses that achieve an export foothold also tend to have better long-term growth. According to the U.S. International Trade Commission, exporting small businesses averaged 37 percent revenue growth between 2005 and 2009, compared to a decrease of 7 percent for non-exporting small businesses. So, it’s perhaps no surprise that the federal government launched an unprecedented focus on expanding the role of small businesses in international trade last year. Known as the National Export Initiative, the project’s goal is to double all U.S. exports by 2014.

 

Breakout.pngCreating personal business relationships abroad

Still, whether a business is selling to a customer down the street or halfway around the world, creating personal relationships remains critical. Word of mouth and referrals helped grow Dateline Exports in the early years, and today, of the company’s 18 employees, five employees travel overseas frequently, four to six times per year for business. In addition to these face-to-face meetings, local agents, who are paid a commission on sales, have been established in each country to provide more immediate service and communication to customers.

 

“We’re out there to help the customer and the reward is that we are helping people in other nations to build up their infrastructure with quality products,” says Hilden. But the fundamental lesson is this, he says: “It’s all about people.”

 

Kamal Kirpalani, Vice President at the Internet e-commerce firm TouchCommerce, agrees. After more than a decade of providing online solutions to help U.S. businesses expand internationally, Kirpalani says overseas business relationships are fundamentally the same as domestic business relationships, with a few notable exceptions.

 

“The communication is a lot more challenging,” Kirpalani acknowledges. “In addition to a language barrier, you need to take into account sometimes significant cultural differences. This leads to more possibilities for misunderstandings to arise and means that you sometimes need to over-communicate to make sure everyone is on the same page.”

 

Of course, email has made communicating instantly around the world nearly effortless, but there are times when a disconnected digital handshake just won’t suffice. International travel is seen as a perk to some and a time-consuming obligation to others, but meeting in person may be necessary, Kirpalani notes.

 

“In the U.S., web-based meetings like WebEx and GoToMeeting are increasingly common and accepted and it is possible to get a lot done without having to travel,” says Kirpalani, who is based in Paris. But in Europe, although virtual meetings are slowly gaining some acceptance, Kirpalani claims that almost all meetings still take place face-to-face.

 

Don’t get lost in translation

To successfully sell in foreign markets, a small business must make a commitment —both in resources and time—to bolster communication at every step of the process. Without such an effort, a small company’s export efforts are likely headed for a steep and possibly expensive learning curve.

 

So, whether you’re staying put or traveling abroad to meet clients, an important early step in building an overseas relationship is to properly translate your company’s marketing materials into the local language or dialect. An experienced translator will understand the target language within the local cultural context and can help to avoid an unintended public relations disaster. When it comes to legal documents, take the time to find a certified translator whose work will be accepted by courts and government agencies in the U.S. and abroad. (To find a certified translator check out the American Translators Association website’s “Find a Translator or Interpreter” tool.)

 

Go big or go home

Going global will lead to new business relationships requiring as much or more time than what a small business is already handling at home. Offering up excuses in the face of supply snafus, mixed messages, or inadequate customer service will displease overseas customers as much as it does domestic clients. 

 

“My most important advice would be to not pursue international expansion half-heartedly,” Kirpalani says. “Cultivating international relationships will probably take longer than expected to pay off.”

 

Hilden has heeded this strategy in his approach. Dateline Export’s in-country sales agents not only help with customer service, they collect payments as well as handle other customer or product-related issues. “One of the biggest challenges is educating customers,” he says, which is an important element of cross-cultural customer service.

 

Where to begin?

The Small Business Administration provides an International Business Plan Workbook at the end of “Breaking Into The Trade Game, A Small Business Guide to Exporting.” And to start your foreign market research, try perusing the U.S. Commercial Service Market Research Library, which contains more than 100,000 industry and country-specific market reports that are available to U.S. companies, students, and researchers for free.

 

How to fund it?

There are new SBA programs in place for small businesses considering exporting: the Export Express loan program, the Export Working Capital Program, and the International Trade Loan program, to name a few. The SBA website has more information about financing and insuring small business exports.

 

Other helpful resources

The U.S. Export Assistance Centers, which are staffed by professionals from the SBA, the U.S. Department of Commerce, and other private sector and public organizations, can answer many import-export questions. The American Association of Exporters and Importers and the Export-Import Bank of the United States are two more good resources. And prior to actually importing or exporting goods, it’s a good idea for any small business owner to check out the U.S. Customs and Border Protection, “Tips for New Importers and Exporters,” which is available online.

 

 

Additional Resources
Books:

Cross-Cultural Selling for Dummies, by Michael Soon Lee and Ralph R. Roberts, 2009.

Going Global, An Information Sourcebook for Small and Medium-Sized Businesses, by Susan C. Awe, 2009.

Import/Export for Dummies, by John J. Capela, 2008.

Start Your Own Import/Export Business, Entrepreneur and Jennifer Dorsey, 2007.

The Small Business Bible, by Steven D. Strauss, 2008


Web:

American Association of Exporters and Importers: 

http://www.aaei.org

American Translators Association

http://www.atanet.org

Customs and Border Protection

http://www.cbp.gov/xp/cgov/trade/trade_outreach/diduknow.xml

Export-Import Bank of the United States

http://www.exim.gov/

International Trade Administration, U.S. Dept. of Commerce: 

http://www.trade.gov

National Export Initiative:

http://export.gov/nei/  

Small Business Administration Office of International Trade

http://www.sba.gov/about-offices-content/1/2889

U.S. Commercial Service Market Research Library

http://export.gov/mrktresearch/


Subscription-business-article.pngby Robert Lerose.

 

Magazine publishers have known for years that their best source of reader-generated income comes from renewing current subscribers rather than acquiring new ones. Renewal series are cheaper to mount than new subscriber promotions and provide a steady stream of instant cash. More and more businesses in different sectors are discovering that this same subscription-based model makes sense for them and for their bottom line, too. Netflix, Amazon, and even unorthodox companies like Zipcar, have used this model to dominate their niche.

 

“The relationship between people and businesses, and the products and services they use, is no longer a one-time event,” notes Tien Tzuo, CEO of Zuora, a Silicon Valley-based subscription billing company. (For a list of other subscription billing and service companies, like PayPal and Chargify, check out this blog post.) Tzuo was formerly chief marketing office at Salesforce.com, a company that shook up its industry several years ago when it chose to offer lower-priced, monthly software subscriptions to its clients instead of charging them high, one-time licensing fees upfront. Going forward, Tzuo says modern companies should find similar ways to build long-term relationships with their customers. “And with these long-term relationships come a recurring, predictable revenue stream,” he says. “That is the subscription economy.”

 

Pull-Quote-Tall.pngBut you don’t have to be a Goliath to take advantage; almost any type of business can put together a subscription plan. For example, online business guide Investopia explains that subscription plans—which are also known as passive income streams—“could incorporate a low monthly fee for on-demand customer service or maintenance, subscription access to exclusive coaching, or a newsletter with interviews, book reviews, and market analysis on your industry.” Combine any of these options with a customer’s fondness for the certainty that a subscription plan provides and you wind up with a near perfect way to keep the money flowing, even in an uncertain economy.   

 

More predictability for business and customer

Red Hat, the leading provider of Linux and open source solutions, adopted a subscription model almost 10 years ago because of its convenience and high customer value. “A subscription model is incredibly simple and predictable for customers,” says Lars Herrmann, director of strategic marketing for the North Carolina-based company. “They know exactly what they have to plan for, exactly what they have to budget for, and what they get at any point.”

 

Red Hat’s offerings are enormously flexible. In the case of Red Hat’s Enterprise Linux program, for example, subscribers get access to the software channels and the customer portal where they can download the products, along with available updates and fixes. In addition, they can choose from a variety of support tools, depending on the subscription plan they buy.

 

Building brand loyalty is another key feature of the subscription model. To that end, Red Hat constantly seeks ways to expand its portfolio of products in order to provide more choices for customers and more revenue streams for the company. “The subscription model forces the vendor to deliver a great experience every day because the money is not made upfront at the sale,” says Herrmann. Instead, he emphasizes, “the money is earned every day.”

 

Generating a predictable revenue stream helped Red Hat maintain a robust bottom line during the current financial crisis. For the completed 2011 fiscal year, the company took in $773.4 million in subscription revenue—an increase of 21 percent over the prior year.

 

Red Hat focuses on giving great value to the customer, Herrmann says. “We are not depending on new license fields every day in order to report fantastic numbers to our shareholders. We depend on delivering great service and driving customer satisfaction.” At renewal time, customers receive an automated notification that their subscription is about to expire with instructions on how to renew. They can choose to renew their subscription as is, or upgrade or downgrade it. The feedback from customers, Herrmann says, has been extraordinarily positive.

 

“They love the subscription model. It’s easy to handle from an accounting point of view. The customers know very well which services they get. They have the flexibility to move their subscription from one system to another and they like the simplicity of managing it. If they don’t want to have a renewal event every year, they can avoid it by buying into a three-year subscription.”

 

Building long-term relationships means higher customer retention

Boutique firm Kroll Bond Rating Agency may be only one-year-old, with just 24 employees, but it rates nearly 18,000 entities, from savings and loans and insurance companies to credit unions and the top 1,000 corporations. In its first year, the company has already seen good results from its subscription offerings, says Kroll managing director and head of the subscription business, Tawanda Seifert.

 

“Most of our clients like the subscription model because they know what they’re going to get, they know the product, they know the timing,” says Seifert. And she emphasizes the important role a subscription model plays in maintaining good customer relationships. “Client satisfaction is an implied or unstated component of the subscription-based model. They know that they can call and ask questions and we’re going to answer the phone”

 

By using a subscription agreement that lasts for the lifetime of the relationship, Kroll has been able to retain about 90 percent of their clients so far. That certainty takes a lot of the anxiety out of planning for future budgets—for both Kroll and its clients.

 

“You’re not asking are we going to do 15 deals this year and how much revenue will that bring us? I think you have a more constant stream” of revenue, Seifert says. “There are months when our invoiced amounts are less and then there are months when our invoiced amounts are very high. Since you know these cycles, it helps you plan and budget your income statement or your P&L.”

 

Replacing uncertainty with predictable revenue and brand loyalty is just one reason that subscription-based business models may be the best arrangement for you and your customers in an unpredictable economy.

Digitally-Dressed-Article.jpgMake sure your website and other digital tools are as effective as possible

 

By Sherron Lumley.

 

Nowadays, the morning commute may be a sideways roll out of bed, then a flex of the index finger to power on the computer. We can attend a conference call in pajamas and chat online with a client over a bowl of cereal.

 

So what does it mean to be dressed for success when we don’t necessarily have to get dressed? The nature of interaction between businesses and customers has changed in the digital world, but the one thing that hasn’t changed is the power of a first impression, a three-to-seven second event. A typical website visitor stays about 44 seconds then moves on unless this first impression presents a reason to stay longer.

 

“I call that short attention span theater,” says Stephen Goebel, Creative Director and owner of ToeShark Visual Communication in Henderson, Nevada. “Marketing must be crystal clear to engage people instantly and keep them around long enough to continue the conversation,” Goebel says.

 

Dressed-Sidebar.pngKnow Your Netiquette

In the 1975 bestseller Dress For Success, author John T. Molloy popularized the concept of power dressing to convey authority and competence. Today, this competitive edge is just as relevant as it was then. “Your site can help position you as an authority—and you should aim for that,” says Drayton Bird, author of Commonsense Direct and Digital Marketing. “Since most people seek information on the web, those who seem better informed are seen as better.”

 

Although content is fundamentally important, the brevity of website visits means that the visual element is crucial. An effective website is visually digestible, clean, simple and clear. It is focused and includes a value statement, so people know what the message is. “The human mind loves order,” says Goebel, who holds a masters degree in Visual Communication from the Pratt Institute in New York.

 

Beyond the Website

Although a company website is usually the most significant element of the digital marketing mix, as in all marketing plans, the medium should fit the objective. “I am all about results and top line revenue, more people through the door, more calls on your phone,” Goebel says. However, not all of his clients need or want a website. There are other digital resources available that are increasingly mainstream and easy to use.

 

“Social media is imperative now. I drag my clients into it. Setting up Facebook and Twitter is a must, and then you have to use these tools,” Goebel says.

 

Charles Hobson, founder of Vanguard Documentaries, has seen numerous technology changes come and go over the last four decades, but that has not changed his underlying love for documentaries and storytelling. His award-winning company has launched a website, Facebook page, LinkedIn and Twitter accounts and he regularly uses Skype for phone calls and videoconferencing and Google Docs for digital document sharing.

 

“I was always into technology,” Hobson says. “I’m what’s known as an early adopter.” Nowadays, he uses Skype’s free videoconferencing and Google Docs to communicate with colleagues abroad and he currently has about 1700 followers on Twitter. “My phone is always beeping,” he says. Twitter is a viral marketing medium, the modern day word-of-mouth, so it’s important to keep in mind that digital communication is not a one-way street.

 

Encourage feedback

In The New Handshake, by Joan C. Curtis and Barbara Giamanco, the authors talk about how to properly toe the netiquette line. “Do not talk constantly about yourself or your business,” they write. “Online, you listen by responding to other people’s Tweets and by joining a conversation in the LinkedIn discussions,” they say. Being able to listen to customers is one of the most useful aspects of interactive media. A company can know, practically instantly, customer response, and from this a business can learn and improve.

 

This consumer participation is what makes digital marketing so revolutionary. Therefore, providing an opportunity for interaction is going to be a top desire of a successful web strategy. The Vanguard Documentaries Facebook page features a preview of a work-in-progress documentary about the Flat Iron Building in New York. Visitors can watch the short film, make comments, send a link to others, and if they want, become backers of the film for as little as five dollars. The page is linked to Kickstarter, a funding platform for creative projects.

 

Figure as a rule of thumb that the annual marketing budget for a small business should be ten percent of the gross revenue for the year. To get in the game with a professionally designed website of eight to ten interlinked pages will cost about three thousand dollars.

 

When hiring a professional to design a website, it pays to shop around. To check credentials or find a website designer, head to the American Institute of Graphic Arts website.

By Jen Hickey.

Going-green-article.jpg

 

This is Part II of our two-part series on green technology and the small business. Part I (click here to read), focuses on the return on investment for green products and technology.

 

More and more people are greening their purchases when it makes sense to do so. The entrepreneur that can provide a green product or service that has clear benefits and can help consumers save money at the same time will find the market wide open. According to a 2007 Simmons study, the number of “behavioral greens”— consumers with the greenest behaviors and attitudes — has risen to 34 million, or 31 percent of the U.S. population. What’s more, as the price differential between green and non-green products has shrunk significantly, increasing numbers of consumers are losing their inhibitions about buying “green.” And despite the recession, the trend toward green continues. According to a 2009 Global Green Consumer survey conducted by the Boston Consulting Group (BCG), there were more purchases of green products in 2008 than 2007 and many consumers said they are even willing to pay a higher price for green products if they are of higher quality.


Opportunities are particularly good for businesses that can distinguish their product from the competition while communicating a clear message about what it means to be “green.” Although sales for Clorox’s GreenWorks have dropped off in the last few years, those of household-product brands like Method and Seventh Generation rebounded in the double digits in 2010. While these products can cost as much as 25 percent more than their non-green competitors, the companies that produce them have a committed record of environmentally sustainable business practices, which tends to attract and retain customers. As the BCG study concluded, consumers not only expect added value when purchasing a green product, they tend to trust the claims of those companies that practice what they preach.


Going_gree-quote.pngGreen Franchises

While the market for green products may seem saturated, franchise opportunities abound for the entrepreneur looking to sell niche products and services directly to the consumer. Founded by Beth Remmes, an environmentally conscious mom looking to do more than recycle, Zola Goods operates on a home-party model that is organized by “coordinators,” who help educate and sell affordable green household and party products directly to family and friends. A start-up kit costs just $149, and coordinators are paid 20 percent on all sales. OnlyGreen4Me offers exclusive dealerships to entrepreneurs looking to open their own on-line Eco-Stores, selling a broad range of green products, with a focus on the office. A setup fee of $2,500 includes the first year hosting and maintenance fee of $1800, with ongoing hosting and maintenance fees of $150 per month in subsequent years. Dealer commissions on products sold range from 10%–30%.

As Glenn Croston, PhD, scientist, committed green practitioner, business adviser and author of 75 Green Businesses and Starting Up Green, notes, business opportunities exist for everyone, whether your background is in sales, finance, education, law, health, art and design, construction trades, or manufacturing. “While the downturn has been challenging, there are businesses that have grown and have even been helped by it. Small green businesses that have done well are those that have found a better or more efficient way to do something that helps homeowners and businesses save money.”

An example of this is America's first zero-waste pack-and-move solution. In 2005, after seeing how much waste he produced when he moved his small office across town, Spencer Brown created The Recopack (Recycled Ecological Packing Solution) from 100% post-consumer trash, from which his Rent A Green Box venture was born. Recopacks and other recycled packing material are rented for two-week blocks. The rental fee includes free drop off and pick-up. Replacing cardboard boxes with reusable Recopacks can save movers up to 50 percent. After perfecting his business in the Los Angeles area, he is selling franchises across the country.

According to Croston, the successful businesses are those that are meeting the demands of the “conserver economy.” Many homeowners and businesses are willing to pay to save on water and utility bills. Green Irene offers self-paced, online Green Business Bureau (GBB)-certified training and marketing support in the growing field of Eco-Consulting for $150 (home consulting; $29.95 annual renewal) and $350 (home and business; $49.95 yearly renewal). Pro Energy Consultants offers HERS Energy Rater Certification and BPI Building Analyst Certification franchise opportunities ($29,900 total investment) as an energy auditor. 

 

A Solar Boom

With the help of the continuation of the federal Section 1603 Treasury program, declining technology costs, and the expansion of new state markets, the solar industry has boomed throughout the recession. According to U.S. Solar Market InsightTM report, published jointly by Solar Energy Industries Association (SEIA) and GTM Research, solar market value grew 67 percent from $3.6 billion in 2009 to $6.0 billion in 2010 and was the fastest growing energy sector in the country. Grid-connected photovoltaic (PV) installations have more than doubled in the past two years alone. “Becoming a solar broker is a way for someone with a sales background to break into the solar industry at fairly low cost,” Croston notes. Prime Solar Network, a one-stop shop for all that is solar, offers regional licensing ($75,000-$150,000 in capital) and brokering opportunities, as well as consulting services and training for those looking to get into the renewable energy market.

 

As Tim Cassidy, CEO of Prime Solar and its brokerage affiliates Empire State Solar and JerseySolar.net, explains, “we do the shopping, from researching multiple panel options and competitively bidding on installation and design,” saving his clients time and money. Although Section 1603 is set to expire at the end of this year, more than half of all U.S. states have mandates in place for 15 to 30 percent of all energy to be generated from renewable sources over the next 20 years, and with the breakthroughs in solar thermal storage and innovation in thin-film technology, opportunities abound for those with contracting, construction, engineering, financial, and skilled trades backgrounds.

 

Have a Plan

Wanting to “do the right thing” is not enough, the “ecopreneur” must find the means to produce, market, and sell his/her idea. To do that, you need a plan. SolarBusinessPlans.com, Tim Cassidy’s consulting service, offers assistance to entrepreneurs looking to start a green business as well as those existing businesses trying to incorporate green standards into their operations. While SBA Express has streamlined the process, loan officers “want to see personal investment, demonstrated sales and strong background,” Cassidy cautions. “With passion comes overconfidence, to succeed you must have a realistic, staged plan for growth.”

 


Additional Resources


Green Products

Zola Goods Sell green products that everyone needs as a home-party coordinator. Start-up kit costs just $149, and coordinators earn 20 percent on all sales.

OnlyGreen4Me Open on-line Eco-Store, offering a broad range of green office and household products. Initial setup fee $2,500, with hosting/maintenance fees of $150 per month after first year. Dealer commissions on products sold range from 10%–30%.


 

Green Services

Open a Rent A Green Box franchise in your area and help movers save up to 50% by renting/selling reusable plastic moving boxes and other packing material.


Eco-Consultant

Become a GBB-certified Eco-Consultant Green Irene for $150 (home consulting; $29.95 annual renewal) and $350 (home and business; $49.95 yearly renewal) and help people green their homes and offices.

 

Energy Auditor

Become a HERS Energy Rater and BPI Building Analyst Certified Pro Energy Consultants franchisee ($29,900 total investment) and help homeowners reduce their utility bills by making their homes energy efficient. 


Solar

As a Prime Solar broker affiliate or regional licensee ($75,000-$150,000 in capital), you will have access to a network of installers and exclusive access to territory in this growing industry.

Going-green-part-1.jpgBy Jen Hickey.

 

The following is Part I of our two-part series on green technology and the small business. Part II (click here to read), focuses on business opportunities catering to the “green” crowd.

 

Situated across the harbor from the gleaming skyscrapers of Lower Manhattan, in the once rough and tumble waterfront of South Brooklyn, Linda Tool has not only survived the continued contraction of New York City’s manufacturing sector (down 8 percent over the last decade) but has expanded, adding four employees since September 2008. Established in 1952, Linda Tool manufactures precision components and assemblies for a number of major aerospace and industrial concerns in the U.S. While it would not be considered “green” in some circles, Linda Tool’s president, Mike DiMarino, believes the integration of green practices and technologies into workplace operations makes sense not only for business, but also for the health and well being of his employees.

 

“The skilled employee base, or ‘human capital,’ needed to succeed in any business is hard to sustain,” DiMarino says. “Creating a safe and healthy work environment, coupled with a livable pay scale and a menu of benefits, helps to ensure that Linda Tool will have that skilled workforce for years to come. Linda Tool has not had a layoff since 1983, a record we are proud of.”

 

One Company’s Path to Green

Among the several clean technology steps that Linda Tool has taken are the installation of an air conditioning system with HEPA filtration and mist collectors on every machine tool and the switch to water-based machine fluids and lubricants to help reduce waste. DiMarino sees these as a “tremendous benefit for employees and I believe it is greatly appreciated.” In addition to recycling employee-generated waste, Linda Tool reuses packaging material and recycles all chips from machine operations, which saves on both labor costs and the purchasing or re-purchasing of packaging materials.

 

These steps are all laudable, but the crown jewel of Linda Tool’s sustainable business practices is the company’s “green roof.” With the help of a Department of Energy (DOE) “cost share grant” of $250,000—bringing Linda Tool’s share of the project to 44 percent—the factory’s 12,500-square-foot tar top was replaced with a patented soil blend of recycled polystyrene and local compost created by Paul Mankiewicz of the Bronx-based Gaia Institute. In place of a long, black, uninviting slab, a lush, wild garden now blooms. This green roof better insulates the building as well as absorbing rainwater that would otherwise run into sewers. Intrigued by the long-term benefits of the project, a team from Columbia University has installed a combined sewer overflow (CSO) device atop the roof to monitor its effects.

 

Since completion of the project in 2009, Linda Tool has seen savings of 40 percent on air conditioning costs and a 20-percent reduction in heating oil consumption, explains DiMarino. “The temperature in our facility is now very stable 24/7, 365 days of the year…a constant 74-degree atmosphere with a 35 to 40 percent relative humidity,” he notes. Not only has the green roof produced immediate savings for Linda Tool, but it’s also made the building more efficient by keeping the shop environment more stable, which “is important for the products that we make.”

 

Starting Small

While a large-scale project such as a green roof may seem daunting, the Small Business Administration (SBA) and U.S. Environmental Protection Agency (EPA) offer information and resources to small businesses looking to take more incremental steps on the road to “going green.” Making your business more energy efficient is a good place to start. Simply turning off lights and machines when not in use, sealing up those energy-depleting leaks to the outside, replacing incandescent light bulbs with compact fluorescent light bulbs, getting rid of those old fax machines (faxpress has made them obsolete), replacing outdated equipment with Energy Star products, and reducing paper usage by recycling can all measurably cut utility costs. There are also federal incentives and various state programs in place to help offset pricier clean technology and retrofit costs.

 

Green Irene, the country’s fastest growing eco-consulting service, and the Green Business Bureau (GBB) have joined forces to help small and midsize businesses adopt sustainable business practices through a green standards certification process. For more comprehensive changes, GreenBusinessPlans.com offers business plan assistance to companies that want to green their operations. “Of the 100-plus business plans developed in the last few years, well over half have been to incorporate green business practices,” CEO Tim Cassidy points out. His consulting company has helped restaurants, demolition and construction companies, gyms, and salons go green. “From a branding perspective, the value of being green outweighs the initial costs,” says Cassidy. For example, “it costs only two to three percent more for a builder to be LEED certified.”

 

For Linda Tool’s DiMarino, going green has not only been good for the bottom line, but also good for business. “It is a very good selling tool. People are interested in this, and I think it shows that Linda Tool is a forward thinking company. It makes clients realize we are there to look out for their best interests.” Linda Tool’s factory goes almost unnoticed nestled in the industrial blocks between a mega Fairway Market, housed in a Civil War-era warehouse along the waterfront, and a 35,000-square-foot IKEA store that now sits upon a once busy dry dock. While the longshoreman have been replaced by tourists disembarking from the Queen Mary 2, Linda Tool remains, carving a new “forward-thinking” path for Red Hook’s economic future.

Pull-Quote-Tall.pngby Reed Richardson.

 

For those companies that are open only a few months during the year, all the normal obstacles to achieving small business success can be multiplied several times over. Yet a common misconception is that seasonal small business owners have it easier, spending half the year simply relaxing rather than working hard on their ventures.

 

“People think I make money all winter long and then just go golfing all summer, but that’s a big myth,” explains Davey Pitcher, whose family has owned the Wolf Creek ski area in southwestern Colorado since 1976. “Like most other small businesses, we have expenses year-round, but our cash flow comes in over just 160 to 170 days. So it becomes a management challenge to prioritize resources the rest of the year.”

 

And because seasonal businesses must cram a full year’s worth of revenue into just a few short months, getting everything in place for a fast start often can make the difference between finishing in the black or running in the red come closing time. In an effort to help you do just that, we’ve gleaned from entrepreneurial experts and real small business owners eight pieces of advice you might consider to get your own seasonal business off on the right foot.

 

1. Start thinking about tomorrow today

Sometimes, the best time to start preparing for your next opening day occurs the moment you close for the season. For example, Pitcher and his maintenance crew began dismantling one of Wolf Creek’s ski lifts on the last night of the 2010–11 season, while the gear oil in the machinery was still warm from hauling skiers up the mountain earlier in the day. “Because the part we had to replace was so expensive—$150,000—and because the lead time on ordering it was so long—close to 8 months—it was imperative that we start the process of preparing for next season as soon as we could.”

 

2. Keep ’em coming back (your employees, that is)

“One of the most important things seasonal business owners can do to be successful is to keep their employees coming back each year,” explains Moren Levesque, a professor of business strategy at York University’s Schulich School of Business. “One way to do this is, just before the end of the season, you offer to share some of next year’s profits with your key employees if they commit to returning next year. Or, maybe even make that same offer for next year at the start of this year’s season to get them to buy in early.”

 

David Gretzmier, who used to own two complementary seasonal businesses in Fayetteville, Arkansas—a lawn care company and a Christmas-light decorating venture—took a somewhat similar approach. He says he gave his employees “convenience pay” that was roughly half of their regular hourly wage during the slow periods in the early fall and late winter. This extra income stream, he found, prevented them from looking for additional work and helped him retain a higher percentage of his employees year-round. Though he was essentially paying them not to work, Gretzmier says the strategy paid dividends in the long run, when the time and opportunity costs associated with not having to train new employees and better customer service were factored in. 

 

3. Don’t assume what worked last season will work this season

“The most dangerous aspect of running a seasonal business is that it detaches itself from the market for a while,” notes Yuval Deutsch, an entrepreneurial studies professor at the Schulich Business School. “Because of this, businesses that, say, closed last spring should get out there early before they re-open and collect information on what the market is doing now.”

 

Even those small businesses that rely heavily upon a repetitive customer base or that are in fairly traditional industries might want to undergo a more in-depth strategy review before opening their doors this year, says Deutsch. “Especially in today’s volatile financial conditions, re-opening a seasonal business that’s been dormant for nearly half the year can be in many ways similar to launching a brand new start-up,” he explains. “You may want to re-do your entire market research in the off-season to see where your advertising focus should be.”

 

4. Business owners need time to mentally change gears for opening day

“For me, there is definitely a period in the weeks before opening day where I have to change my mindset,” explains Pitcher. From working a hectic six out of seven days during the season, he acknowledges that his operational pace does slow to working one out of four days in the middle of summer, with a long family vacation usually scheduled for early August. “But once I get back from that, I’ll have more regular meetings with my staff and start seeing lots of things that need to be taken care of,” he says. “And the panic button gets pushed once we have that first freeze and I wonder why we still have all this junk in the parking lot,” he says, laughing.

 

5. Open seasonally, market daily, learn constantly

When Gretzmier decided to start his Brite Ideas lighting franchise to complement his lawn care business (which he subsequently sold off a few years ago), he expected to easily convert many of his 300 lawn care customers into clients of his new venture. But Gretzmier says he quickly learned that the rudimentary marketing methods he used for his existing lawn care business didn’t carry over—his first winter he only had 10 takers for his lighting service.

 

“When you’re in the lawn care business, you can basically knock on doors while wearing dirty jeans and sign up a customer that will last 10 years,” he explains. But because his new Christmas-light decorating service involved one rather large upfront fee—anywhere from $800 to $4,000 for the set-up—rather than a series of smaller, weekly $50 payments, potential customers were more hesitant to come on board. “Instead, I had to spend thousands and thousands of dollars all summer long to get new lighting customers,” he says. “It took direct mail postcards, which had a response rate of only about one to two percent, getting references, and showing up on someone’s doorstep wearing a nice jacket before I got the sale.”

 

 

6. Unravel that red tape now to stay in the black later

Whether you run one, two, or several seasonal businesses, there will always be some amount of paperwork and regulatory requirements to fulfill. To stay on task during your business’s selling season, why not tackle the red tape before you open the doors again? As one might imagine, a ski resort that also includes a restaurant and bar will have a plethora of licenses, health and safety inspections, and insurance policies that must be updated or redone each year. And while many of them must be complete before the first skier schusses onto a lift, others could be done in-season. “Still, I try and have Wolf Creek fully licensed by mid-September of every year,” Pitcher says. Doing it this way, he adds, allows him to open as soon as the snow cooperates and, for a seasonal business, squeezing in just a few extra open days can sometimes be the difference between a good year and a great one.  

 

7. Start pulling in revenue before you open your doors

In another bid to extend the revenue-generating period, Wolf Creek starts selling full-season passes in early October before the mountain typically opens to skiers. This injection of pre-season money, Pitcher explains, is often instrumental in bridging the gap between the end of last year’s revenue and the start of opening day, and allows Pitcher to handle any unexpected, last-minute maintenance issues.

 

For his part, Gretzmier’s four-month-long holiday lighting business is now reliably profitable, yet, just as before, he’s started to look at ways to bring in cash during the off-season. Rather than return to running a second business, though, he’s started going after wedding and event lighting projects during his off-season to bring in the extra revenue and keep his company’s name and message more current.

 

8. Try to avoid going ‘all in’ early on

To hedge against making a potentially disastrous miscalculation right out of the gate this year, Deutsch also recommends that seasonal small businesses should thoroughly revisit any long-standing vendor relationships and purchasing strategies prior to opening day. “The way things are in this economy, it may be a huge mistake to buy an entire season’s worth of inventory upfront,” he points out.

 

Instead, Deutsch says a business owner might be better off waiting a while to see what customers are buying before committing all of his or her capital. Once there’s enough data to identify some sales trends, a business owner could then devote any held-back cash to purchasing and marketing those products that are selling well. “If all your competitors are stuck with lots of high-end product, but only the low-end stuff is selling, the ability to transition your business’s focus to that latter segment could become a big advantage.”

White-in-article.jpg

by Robert Lerose.

 

Webinars, or online presentations, are a cost-effective way to generate revenue, build brands, demonstrate products and services, provide leads, and position your company as the authoritative source that customers turn to first. “A lot of [my clients] see 70-percent or 80-percent return on investment and sometimes more,” says Leslie Davidson of Davidson Direct, a longtime consultant and provider of webinars and audio conferences.

 

Prices for setting up and executing webinars vary. Even though it might seem counter-intuitive, many businesses can come out ahead by outsourcing the operation instead of managing the process internally. For example, Davidson gives a price break for volume contracts that can make it more worthwhile for budget-conscious businesses.

Before putting on a webinar, Davidson recommends the following:

 

  1. Select a timely topic. The best topics are those where there’s a new law or regulation from the government that your customers need to know about and apply to their businesses. “So-called nice-to-have topics work well, too, as long as they’re something of interest to your readers.” Davidson cites “Cybersecurity Best Practices:  Reducing Risk Across Your Enterprise” for IT departments as a recent example of this type of topic.   

  2. Find speakers who really understand the topic and are appropriate. “If you don’t have anyone [on staff] who has contacts in a particular industry, start with an Internet search.”

  3. Market your webinar with a good email list. If you don’t have an email list, Davidson recommends partnering with associations that have members who would be interested in your topic in exchange for a member discount. “You can add [these names] to your list and use them going forward.”

  4. Earn money with sponsored events. If you offer the webinar for free, try to get someone else to sponsor it. After the session, follow up with a phone call to try to sell your product.

  5. Send a lot of emails in a short time. “Webinars and audio conferences are impulse buys,” Davidson says. “You’re going to get 30 percent to 50 percent of people signing up in the last week before the event. I usually start three weeks out, sending one email a week, followed by two to three emails in the days leading up to the webinar.”

  6. Offer combo deals for extra revenue. Selling the webinar as a CD or DVD can usually add another $50 to $100 to the original sale. Webinars can also be used as premiums in other promotions or sold as audio downloads.

  7. Follow up with a survey. “[On my survey, I’ll ask them to] give me the names and email addresses of everybody in the room,” Davidson says. “I’ll send them a free transcript or another incentive. It helps me build my email lists and also find out what people are interested in seeing in the future.”

 

Outside speakers boost a company’s credibility

Business Valuation Resources (BVR), a provider of products and services to the business valuation profession, puts on about thre

e webinars a month. On average, they get 100 people for their paid webinars and between 300 and 400 for their free sessions.

 

“Within the first 90 days of a free webinar, we’ll convert about 5 percent of them to paying customers, which is really good for us in this market,” says Lucretia Lyons, president of BVR.

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Free events have helped sell their immense product portfolio—from guides and sourcebooks to searchable databases—with an average sale of about $1,500. Some of their webinars soft-pedal a particular product, while others could feature many products related to the webinar’s theme.

 

Maintaining relationships with the thought leaders in their profession has been key to finding good speakers. BVR will get an outside expert to present on their products or services. Then, the names of those who registered for the webinar are turned over to BVR’s internal sales force.

“We’ll tap into a short list of experts for the webinar,” Lyons says. “We don’t want to make it a 100-percent pure sales play. Our market is savvy enough to know that, of course, we’re marketing a new product. But they also have enough trust in us that they know they’re getting one of their peers to give their take on this new product.”

 

BVR has been experimenting with webinar pricing, dropping it from $249 to $139 for a 100-minute session in an effort to go for larger volume. They’ve also had success with series-driven programming for topics with recurring content, which has led to a steady stream of revenue. One of their fastest-growing products gives unlimited access to all of their webinars for only $995.   

 

Customized webinars generate revenue

Business owners are also using webinars to provide value-added services for their existing clients. Du-All, an environmental health and safety-consulting firm, tailored a training program to meet one client’s specific needs.

“We might do a one-hour or two-hour webinar on warehouse safety hazards. If we have a national client, we can reach all their locations and provide some kind of remote training,” says Joe Moulton, manager of environmental services. A one-hour class might cost $450 to $650 depending on the number of attendees.

 

Du-All has just started rolling out with a second webinar series to generate new clients and new revenue. These webinars inform decision makers about new rules coming out and how to comply with them—and then pitch Du-All's services at the conclusion as one way to comply.

 

The webinars are free and last no longer than 30 minutes. Subject matter specialists host them, followed by a short sales pitch at the very end.

 

Low overhead, the ability to reach a large audience and increased revenue make webinars well within the reach of almost every business owner. Or, as BVR’s Lyons says, “Webinars offer the chance to really showcase your company in sort of a three-dimensional way and get people from a distance on board.” 

by Reed Richardson


White-in-article.jpg

By necessity, most small business owners quickly become creative problem-solvers, finding unorthodox means of survival and alternative pathways to success. After all, almost all entrepreneurs launch their businesses with a shortage of funds and a lack of support staff, meaning that they must not only figure out how to build that better mousetrap, but also produce it on a shoestring budget and then advertise and sell it using low or no-cost marketing tactics. 

 

But for all their resourcefulness, there is one potentially powerful asset that small businesses all too often overlook or underestimate; it’s the same one that fills their cash register everyday—their customer. So, if you think that your small business’ current customers are only good for occasionally buying your products or services, it’s time to readjust your expectations and start leveraging their value for greater prosperity and growth.

 

1.  Turn them into sales prospectors for your business

Those satisfied customers going in and out of your front door everyday—or clicking to and then away from your website—could be some of your best salespeople, if only you would ask them. But far too many businesses simply forget or intentionally avoid systematically asking for customer referrals. Even the simple, passive act of putting up a sign in your office or on your website that says, “If you like our widgets, please tell a friend!” rarely occurs at most small businesses.

 

During research on this topic for his recent book, The Referral Engine, author and “Duct Tape Marketing” guru John Jantsch conducted an informal survey of thousands of small businesses. From his results, he found that more than 63 percent of the small companies he surveyed received a majority of their business from referrals, yet nearly 80 percent of those same businesses acknowledged that they had no system in place to consistently generate such referrals. “If you don’t feel strongly enough about the value you or your products deliver to expect that your clients will voluntarily make an effort to see that others receive it,” Jantsch writes in his book, then it’s time to “get to work on creating a brilliant system that’s focused on getting results for your customers.” Doing so might be the difference between getting or losing a majority of your future business.

 

2.  Enlist them into your advertising and marketing plan

With the advent of social media, the playing field has significantly leveled when it comes to extending a small business’ brand. Encouraging happy customers to “like” your business on Facebook or re-tweet product offers and updates you post on Twitter means you can unleash a digital army of marketers for little or no money. But it does require time and careful effort to build these relationships properly. A dormant Facebook wall or, conversely, a constant barrage of unengaging Twitter posts will quickly burn up any word-of-mouth goodwill between you and your customers.

 

Investing in and fostering these fans of your business eventually pays dividends, according to this recent survey by social media consultant Syncapse. Its results estimated that the average annualized value of a Facebook fan to a business was roughly $138 and that each fan spends an additional $72 on products they “like” online versus those they don’t. What’s more, the Syncapse study found Facebook fans are 28% more likely than non-fans to stick with a brand and also 41% more likely to recommend that brand’s products to others. That’s a powerful way to extend your reach and feed the referral engine.

 

3.  Tap their knowledge of your business as a source of innovation and R & D

Entrepreneurs, so focused on rolling out their new product or their latest service, routinely fail to take into account the input of the end user—the customer. But by seeking out your customer’s advice and suggestions—before, during, and after a rollout—a small business owner can often avoid a disastrous product launch, refine their existing platforms, and add successful new companion services to their offerings.

 

Indeed, it pays to think of your existing customers as kind of a never-ending focus group. You may think you know why your customers are purchasing, but unless you ask them you may never know the real reasons. By distributing a steady stream of customer surveys—whether it’s in person, by mail, or online—you can arm your business with a rich database of information about everything from sales frequency to price points to marketing effectiveness to packaging and shipping preferences. Even if you find out that you do have an accurate read on why your customers like your current products or services, it’s worth taking the extra step to find out what else they might like or want to see you provide them. And once you do, be willing to enlist your loyal customers’ help in trying out, or beta testing, these new offerings before you execute a full launch. Such a gesture will convey the trust you have in them and will further cement their loyalty to your company, while, at the same time, your business will reap the real-life, unbiased opinions of the marketplace, making your new endeavor more profitable.

 

4.   Transform them into a vendor or subcontractor of your business by discovering what mutually beneficial talents they possess

Stare at a financial spreadsheet for too long and it’s easy to start viewing your business’s customers as little more than lines on a graph or numbers in a table. That one-dimensional approach fails to consider the talents or skills that your customers possess, talents and skills that just may benefit your business, if only you knew about them. So if your retail business is looking for permanent back-office help like, say, an accountant to do your books, or even someone to handle a temporary project, like a freelance graphic artist to design new promotional materials for your business, it’s a good idea to put out the word to your customers first, both in your store and on Facebook. While you probably won’t find an exact match each and every time, you’re still likely to get at least a few good references.

 

Mining your existing customers for vendor or subcontractor help has an additional benefit—it opens up the possibility of bartering for those products or services, an old-fashioned business tactic that is making a comeback in an era of near universal belt-tightening. Most of the more popular small business barter exchanges, like ITEX, BarterQuest, and NuBarter work by matching up pairs of entrepreneurs and other businesses or individuals, based on correlating wants and offerings. Because these barter exchanges involve larger networks, they have the advantage of offering a more expansive menu of products or services available for barter. However, thanks to their larger size, they almost always match up barter partners that are unfamiliar with one another and, therefore, some risk is involved in the process, even if the exchanges are careful to put policies in place to mitigate that. But bartering with your customers means dealing with someone with whom your small business already has an established relationship, making questions about reliability much less of a concern.

 

5.   Provide more ways for them to pay for what you offer

Small businesses looking for better ways to turn their current customers into greater cash flow should think beyond getting paid at the point of purchase. Instead, develop creative ways to bring in revenue more consistently, through mechanisms like subscriptions, automatic bill pay, and even layaway.

 

“The last 10 years have seen a dramatic increase in companies using the subscription model to offer everything from music, movies, and textbooks to even cars for a monthly fee,” explained Tien Tzuo in a VentureBeat column last summer. Tzuo, CEO of the online billing company Zuora, points to the recent rollout of Apple’s iPhone 3G as an example of why savvy subscription pricing beats one-shot-sales thinking in the long run. “When the iPhone 3G was introduced, AT&T dropped the price of the iPhone by $100 and simultaneously raised monthly fees by $10. In doing so, they were able to sell more iPhones (lower entry fee) but earn more money over the life of the two-year contract.”

 

By building up your customer’s paying “habits,” you’re also building up their loyalty to your business and making it less likely they will stop buying altogether or move on to a competitor. And by linking automatic bill pay capability to a subscription model, you’re less likely to deal with late or missed payments, meaning your business can enjoy greater consistency in terms of cash flow. If your business sells big-ticket items that aren’t a good fit for a subscription model, help your customers avoid dealing with missed or late payments on their credit cards by offering them a layaway plan. Layaway, which is also experiencing a resurgence in the marketplace, gives your business a few weeks or months of steady revenue while turning one big sale into a series of smaller transactions. Here again, your business is getting paid outside the point of final sale, but is also making it increasingly comfortable for a customer to think of him or herself as a repeat customer.

 

6.  Convert them from mere customers to trusted employees

Just as when you invited your customers to work with your business as a vendor or freelancer, don’t overlook asking them to work for your business when you need to hire more staff. Loyal customers make for a great initial pool of job candidates for several reasons: They’re familiar with your products or services, they likely know your staff if not you as well, and they already like what you do enough to spend their money with your business. That you won’t have to engage in a lengthy and expensive job search is yet another advantage to hiring from your customers.

 

Of course, simply hanging a “Help Wanted” sign above your cash register or on your front door is a good start to this process, but don’t forget to post the same sign on your business’s online doorways, like your company website and Facebook page. Why? Because those online friends of your business aren’t just interested in your next product launch or discount offer; increasingly they are looking at your company’s social media sites for news about hiring. In fact, according to this CareerBuilder survey from last August, an online job posting is now the No. 1 thing—cited by 35 percent of respondents—someone visiting your business’s social media site wants to see. That kind of interest can turn a valued customer into an even more precious commodity—a good employee.

White-in-article.pngby Reed Richardson.

 

In Part I of this series we explored some of the compelling reasons small businesses might want to branch out into government contracting and some of the marketing and operational nuances involved if they do. Here in Part II of our series, we distill some of those larger themes into concise, actionable advice from experts in the field.

 

Tip #1: First, get your red tape in order. Here are five quick and easy administrative steps a business owner should complete before embarking on any quest for government contracts.

  1. Get a nine-digit DUNS number for your business. 
  2. Know your business’s NAICS codes.
  3. Complete the federal government’s free Central Contractor Registration (CCR) and certify your small business as specially designated (e.g. veteran-, woman-, or minority-owned), if applicable.
  4. Obtain an active Marketing Partner ID Number (MPIN) from the CCR.
  5. Use your MPIN to register and certify your business using the Online Representations and Certifications Application (ORCA).

 

Tip #2: Conduct market reconnaissance. To find out which agencies have recently bought what your business is selling, look through the statements of work on current federal contracts, which can be found on the FedBizOpps website, explains SCORE mentor Jean Jolkovski. “Then go find similar projects in those same agencies nearby.”

 

Pull-Quote2.jpgTip #3: Get listed (wisely). The federal government has dozens of industry-specific catalogs that its employees and project managers use to find pre-approved vendors from which they can buy. Getting your small business listed in these catalogs, which are called GSA Schedules, isn’t so easy, however, and if not done right it can turn into a big headache. “I always tell small businesses to hire someone to negotiate the process for getting listed with the GSA,” explains small business contracting expert Marc Amtower. “Otherwise you can end up with too low a price or, like a lot of companies, eating the shipping cost.”

 

 

Tip #4: Understand your competition. The government makes it fairly easy to see what other vendors are out there selling in your market space, notes small business contracting expert Marc Amtower in his book Selling to the Government. The primary method of doing this involves running a report called the GSA Schedule Sales Query (SSQ). Amtower estimates that the top five percent of vendors on each GSA Schedule reap somewhere between half and two-thirds of all contracts, while the bottom two-thirds usually share a measly 10 percent. “This provides you with a baseline on the food chain for your niche.”

 

Tip #5: Get free inside information and contract assistance. There are two key resources a small business owner should connect with to begin their search for government contract business—Procurement Technical Assistance Centers (PTAC) and Offices of Small and Disadvantaged Business Utilization (OSDBU). While PTACs are government-funded, third-party partnerships established to help connect buyers and sellers, OSDBUs are funded and staffed from within each government agency. “The people staffing an OSDBU don’t have any contracts and they don’t have any money,” notes Jolkovski, “but what they do have is lots of information.”

 

For example, the OSDBU at the federal Department of Transportation (DOT) offers a handy online contact list of procurement assistance specialists, broken down by individual DOT agency. Other OSDBUs, like the one at the federal Department of Labor (DOL), run quarterly Vendor Outreach Sessions, where entrepreneurs can market their capabilities directly to DOL managers in face-to-face meetings. Local PTACs also offer matchmaking events and procurement training seminars to help small businesses.

 

Tip #6: Tell the government what you can do. To successfully market your small business to government buyers, it’s imperative to create a concise, one-page summary of your company’s qualifications. Known in the contracting world as a Capability Statement (CAPE), this document should include a brief description of a company’s products or services, past industry performance, and staff or leadership. “This CAPE should also be in a pdf or jpg format,” notes Micromentor.org counselor Kenneth Larson, “so it can be quickly attached to an email and then easily opened.” (For more on how to write an effective CAPE and to see some successful, real-life examples, check out Larson’s smalltofeds.com blog on the topic.)

 

Tip #7: Make it easier for the government to do business with you. Marketing expert Amtower recommends that every small business make its online presence more government contract-friendly by dedicating a separate web page to government purchasing and by accepting payments from the GSA SmartPay credit card. “And don’t forget to include the GSA SmartPay logo on your website, alongside those of other accepted credit cards like MasterCard and Visa,” he adds.

 

Tip #8: Get clearance to double the size of your potential market. Because more than half of all government contract money is spent on classified projects, Jonkolvski points out that obtaining a security clearance can open up an even wider range of potential new business. To learn more about the process, check out the Defense Security Service’s Facility Clearance Checklist. There, you’ll find an important first step involves being sponsored by either a government agency or another cleared company. (Here’s a copy of a sample sponsorship letter.)

Finding_the_right_vendors-article.pngby Reed Richardson.

 

This is Part I of a two-part this series about how small businesses can enter into the government contracting market. In Part II of our series, we distill some of the larger themes explored below into concise, actionable advice from experts in the field.

 

For entrepreneurs looking to expand their customer base in a struggling economy, finding new customers becomes critical to survival. So, why not go after what is inarguably the biggest customer of all, one that is almost guaranteed to have a need for whatever product or service a company may be selling? After all, as government contract expert Kenneth Larson points out, “There isn’t much that Uncle Sam doesn’t buy.”

 

Of course, it’s not just what the federal government buys that should get a small business owner’s attention, but how much and from whom. “The major reason to go after government contracts is purely the size of the market. Federal, state, and local government spending accounts for more than 30 percent of GDP,” explains Marc Amtower, author of Selling to the Government. “So, why wouldn’t small businesses want a piece of that?” And thanks to federal guidelines, that small business piece—targeted to be 23 percent of the nearly $500 billion allocated each year—is substantial, totaling $97.9 billion in newly awarded contracts in fiscal year 2010.

 

Pull-Quote2.jpg“The U.S. government market represents the single largest market in the world,” Amtower explains in his book. “[Anyone] can play in it. But not everyone will, and of those who do, most will not succeed. Why?”

 

Patience is a virtue (and a necessity)

A common reason that small businesses fail to crack into the government contract market involves lack of patience and dedication. “A lot of them think that they can somehow expedite the process of getting that first contract,” Amtower says. “But then, after they get six months in and still have nothing to show for it yet, they give up.”

 

For early stage entrepreneurs, six months may indeed seem like an excessively long time investment with no payoff, but most experts say that landing an initial government contract usually takes even longer. In fact, a recent survey of active small business contractors found that it took them, on average, nearly 20 months to land their first federal contract.

 

“It’s not for people who want a quick hit,” advises Amtower. But the payoff, once a business does get its foot in the door, can be lucrative. The same study also found that, of those small businesses listed as an approved government vendor, fully four out of five now have more than $1 million in annual revenue, with about half of that amount coming directly from federal contracts.

 

To build early momentum, shoot for small victories

For a small business’s first foray into the government market, jumping into a bidding war over a long-term prime contract is likely a bridge too far. So, after checking off the necessary administrative steps to sell to the government, a better first-time goal might involve getting approved for one of the General Services Administration (GSA) Schedules. Though somewhat confusing in name, the federal GSA Schedules don’t involve timelines or calendars, but instead function like vast catalogs of government-approved business vendors, broken down by products and services.

 

For example, federal employees in need of, say, a new office chair can pull up the appropriate GSA schedule and shop for different models by their features and prices just as he or she would at any commercial, office-supply store. To purchase, they simply charge it to their government-issued SmartPay credit card, sometimes known as a P-card. (Federal expenditures for less than $3,000 do not require bidding or prior approval—what is known as “paperless procurement.”) The main benefit of selling through the GSA Schedule is that most transactions are of the instantaneous, credit card variety.

 

“For a small business just starting, these micro-purchases can be a great place to get your feet wet,” Amtower explains. Though small, all these incremental purchases can add up to a staggering sum. According to the GSA, there were 98.9 million SmartPay credit card transactions in fiscal year 2010, which rang up to a total of $30.2 billion. “I’ve got a small business client right now that makes $3 million a year just from government credit card sales,” Amtower says, adding that this company’s average SmartPay transaction is only $1,500. This nickel-and-dime sales profile runs counter to many pre-conceived notions about securing multi-year, multi-million-dollar government contracts, he acknowledges, but sometimes pursuing the former instead of the latter makes more sense for entrepreneurs.

 

“You’ll never be a major player by doing it that way, but maybe you don’t want to be,” Amtower says. But he’s also quick to point out that getting one’s small business products or services listed on the GSA Schedule still doesn’t guarantee anything in the way of actual sales, you still have to market your business effectively. “It’s just another tool; think of it as a fishing license rather than the fish.”

 

Selling is selling

“Selling to the government is really no different than in the commercial world,” explains Phoenix, Arizona-based SCORE mentor Jean Jolkovski. “One, you need to establish what you’re selling and two, why they should buy it from you instead of someone else.”

 

This requires small businesses seeking to land a prime or even a subcontract to take an active role in marketing their products and services. To do that, Jolkovski says, entrepreneurs must thoroughly investigate which government agencies and large private contractors might make good potential customers and partners, respectively. But once these contacts have been identified, don’t assume your small business status is enough to land you the deal.

 

“There are 600,000 small businesses registered with the federal government,” Jolkovski points out. “So, if you begin a sales conversation by saying ‘Use me, I’m a small business’ that’s a big red flag to most government contractors, because then they think that’s the only thing you have going for you.”

 

Instead, he recommends using a more typical sales pitch, one that starts off with a focus on your business’s unique sales proposition. “You have to find somebody who wants what you’re selling, then get a face-to-face with the project people who will need what you’re selling.” Only after all that, Jolkovski says, do you want to bring up any certifications your small business might have.

 

No guarantees

“You don’t jump into becoming a prime contractor right away,” explains Larson, who doles out his decades of government procurement expertise on his blog smalltofeds.com. “You usually sort of ease into the business with the intent that you’re going to learn and grow. Often, small businesses position themselves with larger organizations as a Team member or subcontractor.”

 

“Teaming,” as it’s commonly referred to in the government contract world, can be tricky, however, and small businesses, in particular, must constantly be on their guard. But even if a small company becomes a Team member on an ultimately successful bid, Larson says this doesn’t necessarily mean they’ll reap the expected rewards. “Prime contractors are notorious for walking all over their subcontractors,” he warns. “Sometimes they’ll promise the world but then keep 95 percent of the work for themselves, giving the sub the minimum amount of work to fulfill the terms of the contract.”

 

In addition, Larson points out another big caveat that small businesses must consider when dealing with federal contracts. “The federal government usually contracts on a five-year basis, but it budgets on an annual basis,” he explains. So, even if a small business finally inks that lucrative multi-year contract, Congress must still allocate the necessary money every fiscal year to fund it. “If it doesn’t, you could be stuck.” As a result, most experts caution entrepreneurs to avoid putting too many of their eggs in the government contract basket.

 

Still, government contracts can be an excellent source of cash flow, Larson notes, providing a small business with that steady stream of income necessary for it to achieve real, sustained growth. As an example, he points to one of his former mentored companies, the California-based IT firm VSolvIt. “When they started five years ago they had nothing, but last year they landed a five-year, $14.5-million contract with the USDA,” he says. With that kind of regular income, he adds, thriving, rather than merely surviving, now becomes the goal.

 

“It’s really an art form,” Larson reiterates, “but once you understand the nuances of how to market and sell to the government, it can definitely be worth it.”

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