Ordering is done online, where customers can download an app, take smartphone snapshots of their feet and create a 3-D model. Shoes, which cost $199, are made of recycled materials and are thickly padded for comfort.

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With the rise of new technologies like smartphones and 3-D printers, fashion start-ups like Feetz are changing the ways goods are ordered, made and sold.

Like Ms. Beard, several founders of these companies don’t have fashion backgrounds. Instead, they consider technology the answer to off-the rack, mass-produced goods, which are increasingly shunned by millennials. Consumers with hard-to-find sizes — like petite, or big and tall — will find shopping simpler.

Traditionally, manufacturing is the most expensive part of the retail supply chain. Creating goods in small batches is difficult and costly. Most are manufactured overseas, and shipping goods to the United States adds time and cost to the process. So even “fast fashion” can take about six weeks to hit store shelves.

The beauty of instant, customized fashion, experts say, is that goods can be made at a lower cost and more quickly — yet in a personalized style.

Although disruption is a hot idea in the tech world, not everyone is convinced that this type of innovation will revolutionize fashion. James Dion, a retail consultant in Chicago, said he viewed customizable fashion as a “passing fad” with limited appeal.

And the industry has already had one of its first failures: Tinker Tailor, which made custom luxury women’s apparel, closed last year after funding dried up.

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These are still early days for 3-D printing, said Uli Becker, the former chief executive of Reebok and an investor in Feetz. The offerings are not very diversified, and they are limited to basic goods. And fabric cannot yet be printed.

But he sees great potential for 3-D printing. “You can start producing in America, for America,” he said. “Production facilities can be in the same place where you sell products, which creates jobs.”

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Also, the technology improves every month, Mr. Becker added. “This is the equivalent of the 1980s cellphone in a briefcase that puts a brick on your ear,” he said. “In the future, we’ll go into showrooms, select what we want and then order online or print out the product ourselves,” he said.

Custom shoemakers like Feetz will also make in-store shoe fittings obsolete, experts say. “In 10 years you won’t physically try on a pair of shoes,” Ms. Beard said.

The promise is making Silicon Valley take notice.

“We’ve been looking for companies that can use advanced technology,” said Vijit Sabnis, a venture partner at Khosla Ventures and an investor in Feetz. “And geeks and nerds are developing it. Feetz, for example, can change our experience in buying products.”

Retail goods will eventually be made by robots and 3-D printers, he said. And they will be made in hubs rather than big plants.

“We’ll get rid of shipping costs and rethink the supply chain,” he said. “It’s really cool.”

Khosla Ventures has also invested in fashion start-ups that use technology other than 3-D printing. One is Shoes of Prey, a website that allows shoppers to choose colors and styles of women’s shoes, in most cases, for less than $200. Another investment, MTailor, makes custom men’s shirts and suits by taking measurements on a smartphone. Shirts start at $69.

Even the humble T-shirt is being reinvented. Teespring, founded in 2011, shipped more than 20 million custom T-shirts last year. It allows anyone to design custom T-shirts with messages related to topics such as coffee, yoga and football and then sell them to customers.

“We’re a technology company that creates T-shirts,” said Walker Williams, 27, chief executive of Teespring, who started the company with Evan Stites-Clayton, a friend from Brown University. “The future of fashion is in smaller brands that have relationships with customers.”

Eventually, they plan to offer other custom clothing. Venture capitalists including Andreessen Horowitz, Khosla Ventures and Y Combinator have backed them to the tune of $56 million.

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Teespring built its own manufacturing systems in a factory in northern Kentucky that once made helicopters. Of its 400 employees, 40 are on the engineering team, building patented technology for rapidly printing small batches of T-shirts. Profit margins are slim, Mr. Walker acknowledges, but they are rising.

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“Anyone can bring a creative idea to life without having to be a retail expert,” said Lars Dalgaard, general partner at Andreessen Horowitz. So consumers can now express themselves in a way “that was never possible before,” he added.

One promising area is custom women’s fashion. Shelly Madick and Aubrie Pagano, who met as students at Harvard, started Bow Drape.

Last year, the company opened a pop-up customization store in a Nordstrom location. Customers could design their own products on an iPad and pick them up the same day.

“It was a huge success,” said Ms. Pagano, Bow Drape’s chief executive, “and this year we’ll be doing it in 18 Nordstrom’s stores and with other retailers.”

After a successful Kickstarter campaign, the company has so far raised $2.6 million from investors like VTF Capital, started by Zappos’s chief, Tony Hsieh. Revenues last year were $1.2 million, and the company will be profitable by 2017, Ms. Pagano said.

As with any young industry, there have been stumbles. Bow Drape was using 3-D printers to make $100 belt buckles in stainless steel but abandoned that effort because of low demand.

“Online, our customers wouldn’t pay that amount,” she said. So right now, the company is not doing any 3-D printing. Instead, customization is done at the factory where the clothes are made, with a heat press.

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Technology is also helping start-ups hone their offerings with data analytics and algorithms. Stantt, a start-up based in New York, offers men’s shirts in 75 sizes based on just three measurements, guided by an algorithm.

The founders, who are former Johnson Johnson brand managers, have already raised $2.1 million from angel investors.

Shirts are made in one day in Central America. But because there is no intermediary and no leftover inventory, Stantt can sell its shirts for less than other custom shirt companies. Dress shirts, for example, sell for as little as $98 each.

“We’re not a fashion brand,” said Stantt’s chief executive and co-founder, Matt Hornbuckle, 31. “We’re creating something better, a perfect closet.”

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Article source: http://www.nytimes.com/2016/09/15/business/smallbusiness/your-next-pair-of-shoes-could-come-from-a-3-d-printer.html?partner=rss&emc=rss

Four months later, he was out of money and living in his 1999 Lexus. When the Dojo’s manager asked for a volunteer to clean the restrooms and kitchen every afternoon in exchange for free membership, Mr. Brooks raised his hand.

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Without realizing it, he had taken the first step toward creating his start-up: a cleaning company that relies on analytics to improve efficiency and set prices.

Larry Maloney, a founding member of Hacker Dojo, said people were dissatisfied with the quality of the work done by the cleaners before Mr. Brooks volunteered.

Normally, said Mr. Maloney, the Dojo smelled a bit sour, largely because of developers working late into the night. “After Simon,” he said, “it smelled squeaky clean.”

That was no easy feat. The Dojo is a sprawling space of more than 16,000 square feet. It never closes and typically has at least 300 visitors each day.

After eight months, management got rid of the small local firm that did its cleaning and began paying Mr. Brooks $400 a month for his services.

Eight months after that — having spent about two years trying unsuccessfully to create the Gadzookery app — Mr. Brooks took a hard look at the commercial cleaning market.

“It was a $51 billion industry,” consisting mostly of small firms, he said. Mr. Brooks saw an opportunity. Hacker Dojo’s management agreed to give him a one-month advance to buy the equipment and supplies he needed to start, and in 2015 he started Squiffy Clean.

There are about 100,000 firms in the commercial cleaning business in the country today, said John Barrett, executive director of ISSA, a trade association for the global cleaning industry. The 50 largest companies account for about 30 percent of the revenue, according to an industry report published by Dun Bradstreet, leaving the other firms plenty of room to capture customers.

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More than 90 percent of janitorial services companies are sole proprietorships, according to a report from the industry research firm IBISWorld. But the greatest turnover is at the start-up level, Mr. Barrett said.

“The churn is unbelievable,” he said.

So far Mr. Brooks has avoided that churn. Six months after he began, he was earning enough to move his business out of Hacker Dojo and into an office in Palo Alto.

His company is unusually high-tech for the industry. It collects more than 700 points of data, like the time it takes to mop a square foot, and uses the information to improve and refine its cleaning methods, and to set prices.

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“We have a client with an 8,000-square-foot building and we dove into the data and made changes to how the cleaning is done, such as combining certain tasks or changing the order in which they are done, and saved $600 in monthly labor costs,” Mr. Brooks said. “Margins in the industry are so low that we have to shave off every bit of labor we can.”

Most small cleaning companies charge by the number of labor hours, but Squiffy Clean created an algorithm that sets prices based on the data it collects about cleaning sites.

The company is also developing a technology to prevent fraudulent workers’ compensation claims. It will use data to help determine whether an incident occurred.

Mr. Barrett at ISSA says although large companies in the contract cleaning business use high-tech methods, it is far less common among smaller firms.

Compared with other office cleaning companies, Squiffy Clean generally pays a higher hourly wage (about $17 per hour). The median hourly wage in the industry is $11.27, according to the Bureau of Labor Statistics. It also gives cleaners equity in the company and makes their safety a top priority. The residential cleaning service Handy, for example, was sued in 2014 by two of its former house cleaners, who accused the company of a variety of labor law violations.

Starting any business, regardless of the technology, is difficult — and even more so when the founder is homeless. But Mr. Brooks was physically and mentally healthy and had the support of Mr. Maloney and others at Hacker Dojo.

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In March, Mr. Brooks raised $10,000 in loans through the peer-to-peer lending platform Kiva. Squiffy Clean also has a presence on the start-up investment platform AngelList and is in talks with potential investors.

Still, finding reliable cleaners when the company had no track record was difficult.

The commercial cleaning industry also has a reputation for being unsafe for women, leaving those who work in empty office buildings at night vulnerable to sexual assault and rape.

The PBS show “Frontline” aired a three-part documentary in 2015, “Rape on the Night Shift,” after 21 women sued ABM, the nation’s largest janitorial services company, for failing to protect them from sexual assault by male co-workers and supervisors.

To address those concerns, all of Squiffy Clean’s night crews clean in teams of at least four. There are no on-site supervisors and there is never a lone woman on the team, Mr. Brooks said.

Although all 18 of the company’s workers are independent contractors, Mr. Brooks says he plans to eventually make them employees.

Today Squiffy Clean, still in its pilot phase, serves the Bay Area from San Jose to Palo Alto. The company has five initial customers. Its newly revamped website gives potential customers a guaranteed price quote in 15 seconds, Mr. Brooks said.

One of Squiffy Clean’s first clients was Singularity University, a Silicon Valley think tank and start-up accelerator.

“A lot of people view janitorial work as just a way to make money, but Simon embraces it as the very important job it is and takes a very scientific approach to it,” said Tom LeGan, the facilities manager at Singularity. “He’s also very compassionate about his workers. You don’t see that in many corporations, let alone a janitorial services company.”

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Mr. Brooks still faces many of the same difficulties as other Bay Area start-ups, including a tight labor market.

“We are all trying to attract the best engineers and the cleaning industry is not sexy, so it’s tough,” he said.

Whatever the challenges, he said his life had been improved by entrepreneurship. He no longer lives in his car and has moved into an old 34-foot recreational vehicle.

When he gets home, he is grateful just to have a shower and a bed. “I’ve lived in vehicles for so long I’ve gotten used to it,” Mr. Brooks said. “And this is a whole lot better than a car.”

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Article source: http://www.nytimes.com/2016/09/08/business/smallbusiness/a-cleaning-start-up-wielding-mops-buckets-and-700-data-points.html?partner=rss&emc=rss

Even in an era when it seems every life is displayed on social media for the world to see, a whole generation is getting older, and its stories, if not written or otherwise recorded, will be lost. Serving that market is becoming a small-business enterprise.

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Although no statistics are kept on the number of people who run such companies, the Association of Personal Historians — which has the motto “Saving Lives One Story at a Time” — has almost 600 members. And many people who work in the field are not part of the group.

“We’ve had our ups and downs, but we’re trending upwards,” said Bill Horne, president of the association, who runs Launceston Services, a freelance writing and editing company in Ottawa, Canada. The association has members from 13 countries, and the membership is expanding from being largely white, female and middle-aged, he said. “No one is going to be a millionaire doing this, but some people do make a comfortable living.”

Ms. Axelson-Berry founded the association when she was starting out in 1995. She was a newspaper editor, and while writing her mother’s memoirs she decided that other people would also want memoirs of their parents and that she was the one to create them.

“I went down a lot of false paths and went into credit card debt,” she said. Her break occurred in 1998, when she and a few other personal historians were featured in The Wall Street Journal. A flurry of other articles in national newspapers followed. A few years later, she had a self-sustaining business.

Ms. Axelson-Berry publishes about 12 hardcover books annually, averaging 300 pages. She charges a minimum of $5,000 for an assisted memoir, in which the client writes the draft and Ms. Axelson-Berry pulls it together. Her rate is a minimum of $35,000 for a commissioned memoir, in which she or a member of her team does the whole job. That fee includes traveling, usually at least twice, to wherever the customer lives and spending a few days conducting interviews.

Kit Dwyer, 59, was a project manager in the digital mapping industry when she saw the opportunity to enter the market.

“Our parents’ lives aren’t on the internet,” Ms. Dwyer said. “We can’t find out about them if we don’t speak to them. And it’s slipping away.”

Ms. Dwyer, who lives in Denver, has spent the last six months setting up her business. She hopes to concentrate on audio memoirs, combining them with digitized photos and memorabilia. She is exploring producing slide shows with voice-over narration by the client.

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As part of her preparation, a few months ago Ms. Dwyer hired Dhyan Atkinson, a personal strategy coach who specializes in training people to be personal historians.

Ms. Atkinson, who lives in Boulder, Colo., started MemorySaving.com, three years ago after working as a business coach with a member of the Association of Personal Historians for more than a decade.

She said interest in her services is growing, especially among “encore entrepreneurs,” former journalists, social workers and therapists who have retired or been laid off and are looking for a second career.

“Most personal historians up to now have not been very business-savvy,” Ms. Atkinson said.

She offers a variety of classes in business skills, and personal consulting, such as a one-hour session for $50 to $85. A six-month package of 12 one-hour sessions costs $2,500.

Many novices embrace the idea of talking to people and writing about their lives, but are not aware of the minutiae and marketing strategies involved. For example, transcribing interviews is very time-consuming, a minimum of four hours for a “perfect” interview, Mr. Horne said, with time added if the interview is disjointed or if the subject has a heavy accent.

When talking to a prospective client, Ms. Atkinson advised, discuss the emotional reasons for a memoir and its potential impact before mentioning price.

Ms. Axelson-Berry researches every potential client, looking for red flags, such as if he or she has sued many people or has been sued. She has also turned away people who she said were “proudly unethical.”

One prospective client talked about how he cheated his business partner, she said, adding that she did not want to preserve his memories.

Experienced memoir writers say a signed contract that details the expectations of the clients and the company is mandatory. That includes the number of revisions covered under the initial price quote (the usual is one to three) and a schedule of costs for additional work. Without such stipulations, a writer could be asked to produce draft after draft by a client who is impossible to please.

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Memoirists must learn not just interview techniques, but also how to comfortably conduct the sessions. “You’re not just making a transcribed interview,” said Mary O’Brien Tyrrell, who ran a memoir-writing business for more than 20 years before retiring in 2008.

“You’re intensively listening,” she said. She forbids others from being in the room during an interview because she had seen well-meaning relatives inject their own version of events.

Ms. Tyrrell, who lives in Orleans on Cape Cod, Mass., now writes, speaks and teaches classes. In 2012, she published “Become a Memoirist for Elders: Create a Successful Home Business.” At the height of her business, her annual profit was $100,000, she said.

And since personal histories are, well, so personal, it is easy for clients and their relatives to mistakenly view a professional interviewer as a best friend.

“A daughter will say, ‘Mother so enjoyed working with you. Can you stop by once a week?’” Ms. Tyrrell said. “And I said ‘No.’ I had to earn a living.”

And writers must learn to be ruthless when editing a life story.

“A client can go on for half an hour about how powerful his car was in 1920, and that’s going to be one sentence,” Mr. Horne said. “You have to be diplomatic.”

But the upside of the business — the gratitude of clients and their families — more than makes up for the difficulties.

While a memoir might be primarily for future generations, it also provides a rare opportunity to reflect.

Ms. Tyrrell mentioned her first client, a woman who was dying of cancer at 52. She was too ill to read her finished memoir, so Ms. Tyrrell read it to her. At the end, “she turned to me,” Ms. Tyrrell said, “and told me, ‘Now I realize I had a very wonderful life.’”

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Article source: http://www.nytimes.com/2016/09/01/business/smallbusiness/preserving-a-lifetime-of-memories-for-posterity-and-profit.html?partner=rss&emc=rss

He holds an ownership stake in a co-op of Maine fishermen, which allows him to track where and how the lobsters are caught, and control the quality, freshness and pricing. He also owns the processing plant, Cape Seafood, that packages and prepares the lobsters for his restaurants.

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“We’re able to trace every pound of seafood we serve back to the harbor where it was sustainably caught and to support fishermen we know and trust,” Mr. Holden said. “There’s no middleman in that whole chain.”

This might seem obsessive. But in business, it’s called a vertical integration strategy.

Consumer demand for fresher, healthier ingredients has led to a surge in the popularity of farmers’ markets and local food co-ops over the last five years, said Bonnie Riggs, a restaurant analyst at the NPD Group, a market information and advisory firm.

For restaurants, though, simply buying fresh, all-natural ingredients isn’t enough, as food-safety concerns like E. coli scares continue to plague the industry.

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Oil companies have long practiced a vertical integration strategy to track and control the flow of petroleum from the oil field to the gas pump, said Jennifer Friedman, vice president of Wolters Kluwer’s BizFilings, a legal services company that helps businesses incorporate. Now the practice is gaining momentum in the food industry.

“Owning one or more levels of the supply chain is a highly effective way to maintain quality and obtain an advantage against competitors,” Ms. Friedman said.

For Mr. Holden, who had zero experience in the restaurant industry, it has been a steep learning curve.

Mr. Holden, now 32, was raised in Cape Elizabeth, a town of fewer than 10,000 people just outside Portland. His father, Jeff, worked as a fisherman and lobster processor, and his mother, Donna Lu, as a schoolteacher.

He spent summers working on the docks, helping his father at a lobster processing plant at the age of 10. He unloaded fish on the wharves at 13 and worked as a sternman at 16. At 17, he built his own 16-foot boat in woodworking class in high school, and dropped his own lobster traps in Tenants Harbor up the Maine coast.

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His parents wanted more for him and encouraged him to go to Georgetown University. He graduated with a bachelor’s degree in business administration in 2007 and took a job as an investment banker in New York.

Ultimately, though, investment banking “wasn’t where my passion was,” he said. With $34,000 in his pocket in August 2009, he set out to build Luke’s Lobster. “My mother’s reaction was to cry,” he said.

His father’s relationships with the Maine lobster industry helped him buy directly from the fishermen. He posted an ad on Craigslist, where he found his business partner, Ben Conniff.

Mr. Conniff, 31, was a Yale graduate who had been writing for magazines and blogs in New York when he met Mr. Holden. Though he had little experience in the food industry, he jumped at the chance to help start a business.

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On Sept. 1, they signed a lease in the East Village, hammered a sign on the door — “Luke’s Lobster coming soon” — then hustled to get building permits, health inspection approvals, furniture and a staff in time for the Oct. 1 opening.

Mr. Conniff used his storytelling skills to promote the business to food bloggers and on social media.

“We had such great buzz that we sold 500 lobster rolls on the first day and did nearly $10,000 in business,” said Mr. Holden, who recalled customers lining up around the block. Within 17 days, they had broken even and were making plans for their next restaurant opening.

Luke’s Lobster generated sales of $20.9 million in 2015, up from $327,408 in its first year in 2009. Mr. Holden is projecting sales of $25 million this year and $42 million in 2018.

Plans are in the works to open six new restaurants this year and 40 more by 2020. The company now has 125 full-time employees and 175 part-time workers, while Cape Seafood employs another 125 full-time people.

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Still, there were some hiccups. In the beginning, it was just the two of them doing everything. “My responsibilities ranged from permitting and hires to cleaning toilets and making food,” Mr. Conniff said.

Navigating New York’s bureaucratic quagmire to obtain building and health inspection permits was — and continues to be — a challenge. Mr. Conniff recalled spending many hours being shuffled from floor to floor with paperwork before hiring an expediter to get the permits.

Although they managed to get all the permits in 30 days for the first restaurant, it hasn’t been that fast since. “It now takes us six months to a year to do it — never just 30 days,” Mr. Holden said.

In the early days, they sometimes ran out of lobsters and buns; Mr. Holden’s father would have to make “midnight runs” from Maine to bring them in.

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Luke’s success also hinges on persuading a casual-food diner to pay $17 for a lobster roll rather than buy a burger and fries.

“It’s easier to sell a burger at Shake Shack’s price point or a burrito at Chipotle’s price point than it is to sell a lobster at our price point,” Mr. Conniff said. “It’s our constant job to tell the story of why our seafood is better and help everyone understand why it costs what it costs.”

In 2012, the founders built their own processing plant, Cape Seafood in Saco, Me., outside Portland. This year, they took an ownership stake in a fisherman’s co-op in Tenants Harbor in Maine, completing the vertical integration strategy — from ocean to table.

Securing the co-op partnership took some finesse. It took more than a dozen meetings to persuade members to sign up, said Merritt Carey, a consultant and member of the co-op board.

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When Mr. Holden agreed to buy all of the co-op’s catches for his restaurants, support its sustainability practices and give the co-op 50 percent of the profits from a Luke’s Lobster restaurant that is attached to the wharf, the fishermen agreed.

One fisherman, John Tripp, 28, said he was so impressed with the partnership that he left the wharf in South Thomaston where he was working with his father to join the Tenants Harbor co-op.

The co-op produces 20 percent of the lobsters that Luke’s restaurants need. The rest come from sustainable harbors in other parts of Maine, as well as from New Brunswick and Nova Scotia in Canada.

Jay Takefman, a partner at Quilvest Private Equity, recently took an equity stake in Luke’s Lobster. He previously invested in restaurants like Baja Fresh, which was sold at its peak to Wendy’s for $275 million in 2002.

He doesn’t rule out a sale or initial public stock offering for Luke’s Lobster eventually.

“We didn’t put any time frame on this,” Mr. Takefman said. “We’re patient capital and long-term investors.”

Mr. Holden said he had not thought that far ahead.

“I love this business and it’s a part of who I am and who I want to be,” he said. “It’s something I want to continue to have a role in for the indefinite future.”

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Article source: http://www.nytimes.com/2016/08/25/business/smallbusiness/lukes-lobster-restaurants-coops-seafood.html?partner=rss&emc=rss

THE CHALLENGE Mr. Vega left a corporate job producing print publications for the financial industry to take over the pizzeria. He felt constrained by his business’s size and location: a small restaurant without a parking lot on the six-block main street of a blue-collar town. Even with his improvements, the business was bringing in only about $10,000 a week. It was profitable, but only because he was working long hours, typically seven days a week, to hold down labor costs. Mr. Vega knew he couldn’t continue like this.

THE BACKGROUND His father was from Spain and his mother from Cuba, but Mr. Vega, who grew up with Italian friends in New Jersey, not only hung out in pizzerias but worked in one, starting during his sophomore year in high school. After getting a business degree from Montclair State University, he worked in his family’s printing business before moving on to KPMG and then Thomson Financial, where he oversaw printing operations.

Along the way, Mr. Vega usually had some kind of business on the side. In his 20s and 30s, he worked weekends as a disc jockey, started and sold an Internet dating service and bought and flipped houses. So it was not entirely out of character when, stopping in for a slice at Father and Son Pizzeria one night — years after he had last worked there — he ended up buying more than a slice.

“Why don’t you sell the place?” Mr. Vega asked, when his former boss confided that he was tired of the grind.

“I don’t want to sell to just anybody,” said the owner, whose son had long since lost interest.

Mr. Vega bought the business, but not the building, for $75,000. He wasted little time expanding the menu beyond pizza, subs, chicken Parmesan sandwiches and spaghetti and meatballs. “I made it more of a full-blown Italian kitchen and added a dessert menu,” he said.

With room for only eight tables, Mr. Vega upgraded the takeout business, introducing Internet orders, adding credit card sales, offering “take and bake pizzas” that customers could heat at home. Without a parking lot, and with on-street spots scarce, he started curbside pickup. He nudged the price of a pie up to $11.50 from $11 but held the line at $11 for his chicken francese. He doubted he could charge the going rate of $16 or so at nearby Italian restaurants that had tablecloths, servers, parking lots and liquor licenses.

The former owner had gotten by with a skeleton staff: his wife, himself and a dishwasher. Mr. Vega brought on a cook and a pizza maker, driving up expenses. But he made the sauce himself, tweaking the recipe he had learned years earlier as an employee. So many customers asked for extra sauce — and for him to bottle the slow-simmered red sauce — that Mr. Vega decided to comply. Soon, instead of making 40 quarts a week, he was making 40 quarts every two days. The jars, he said, “were flying off the counter.” And the margins were higher for the red sauce than for his menu items.

THE OPTIONS With restaurant profits still meager come the summer of 2009, Mr. Vega and his wife contemplated two very different ways to turn up the heat. They could expand, adding tables, raising prices and becoming less of a takeout place. Or they could sell the restaurant and focus solely on becoming a manufacturer and wholesaler of tomato sauce.

Exploring Plan A, Mr. Vega talked to a contractor about building a second floor atop the one-story building to add a dining room. He also discussed moving the business down the block, to a storefront with room for more tables. Either way, there would still be a parking problem. And without a liquor license, which could cost $250,000, Mr. Vega felt he would still be poorly positioned to charge $16 for chicken francese.

Article source: http://www.nytimes.com/2014/01/02/business/smallbusiness/a-business-owner-seeks-an-alternative-to-working-seven-day-weeks.html?partner=rss&emc=rss

That’s the message being delivered to more than 70,000 small-business owners in developing countries where credit ratings are rare and many potential entrepreneurs keep their money in cash rather than bank accounts.

Banks in 16 countries are using a psychometric test to predict future behavior — specifically, whether someone will pay back a loan. Originally a Harvard doctoral project, the Entrepreneurial Finance Lab’s test has increasingly won the confidence of risk-averse bankers in places where, many economists believe, credit bottlenecks are severely stunting growth.

Now, a new partnership with MasterCard has potential to speed the model’s proliferation.

In the United States and other mature economies, assessments by multiple credit agencies based on a lifetime of bill payments and account balances help determine with relative confidence whether to give an individual or business a loan.

But the lack of such data in much of the rest of the world creates a “massive inefficiency in emerging markets,” said Bailey Klinger, 34, the chief executive of the Entrepreneurial Finance Lab. Banks have money to lend, but even profitable small businesses often cannot access it, choking growth.

In wealthy countries like the United States, small- and medium-size enterprises are typically responsible for about half of business activity and almost two-thirds of employment gains. In poor countries, such enterprises, on average, account for only about 17 percent of spending and a third of new jobs.

In 2006, Mr. Klinger was studying this problem, known as the “missing middle,” with Prof. Asim Khwaja at Harvard’s Kennedy School of Government. They struck upon a technique some companies have long used to screen potential employees.

For Jhonathan Darwin Montes Mendoza, a 40-minute test led to a $1,500 loan last year to buy Christmas-themed towels, curtains and other decorations ahead of the holiday rush for his market stall in Lima, Peru. Mr. Montes’s score gave Banco Interamericano de Finanzas confidence he would pay back the loan — even though he had been in business for less than a year, with no credit history.

“You can’t give a loan to someone without knowing if they have psychological problems,” said Mr. Montes, 23, in Spanish, perhaps not fully understanding what the test was measuring. Though similar to tools used by psychologists to assess I.Q., define personalities or screen for addictions, the bank’s test was intended to measure the traits at the core of entrepreneurship: fluid intelligence, business skill, integrity and attitudes.

After paying back the first loan, Mr. Montes is on a second round, paying down a $2,500 debt. The finance lab calibrates the test for each country where it is introduced.

The lab’s model asks questions that do not necessarily have a right answer; using an algorithm, it aims to predict whether an individual is likely to default based on how the answers relate to one another.

For example, to assess their sense of personal control over outcomes — which tends to correlate with loan repayment — respondents might be asked to rate how much they agree or disagree with the statement: “I believe in the power of fate.”

Another question on risk tolerance might ask them to choose between opposing responses with equal social desirability, such as: “I plan for every eventuality,” “I’m in between” or “Planning takes the fun out of life.”

There are some unexpected findings: Optimism and self-confidence are good signs among seasoned entrepreneurs, but high levels in younger business owners do not bode well, statistically.

And the math and reasoning questions meant to measure fluid intelligence can also assess integrity — of the loan officer. Too many correct answers can reveal that an applicant was coached.

The small-business loans have proved to be a “good revenue source” for Banco Interamericano de Finanzas, the fifth-largest commercial bank in Peru, where they have increased by about 50 percent, said Hugo Palomino, its director of commercial products. Over the last year and a half, repayment rates on loans made with the entrepreneurial finance lab’s model have been about the same as those that used a traditional assessment.

Tanzina Vega contributed reporting.

Article source: http://www.nytimes.com/2013/12/31/business/credit-scores-from-a-test-not-a-history.html?partner=rss&emc=rss

None of this would be especially notable if not that, for most of her life, Ms. Lerner didn’t know that the Internet existed. The daughter of a rabbi, she grew up in what she calls an “ultra-Hasidic” home, where information about the outside world was limited. Not until she was estranged from her family and community did she fully experience the broader world.

She founded MOD, which has about 10 employees and is based in Brooklyn, in 2009 to handle furniture repair claims for corporate clients like Crate Barrel. But after two years, she switched to reupholstering, kick-starting the new business with a Groupon deal. This year, she said, she will finish with sales of just under $2 million, serving customers like the Barclays Center and Long Island Hospital. She explained her unusual journey in a recent conversation that has been edited and condensed.

Q. What is your educational background?

A. I attended Hasidic schools as a child. By eighth grade, I’d started acting out and questioning everything. I’d ask, ‘Why do you do this?’ And the answer was ‘faith, faith, faith.’ I was kicked out of school in Brooklyn because I was a bad influence. None of the other local schools would take me. So my family shipped me off to an all-girls Orthodox boarding school in the boondocks of Ohio. Then, after high school, the culture of ultrareligious Hasidic Jews is you go to seminary for a year in Israel. So I did that. But they threw me out after they caught me at the mall going to see a movie. So I had to go back to New York, where, at 19, I married a Hasidic boy and started attending Brooklyn College. By the time I graduated, with a degree in business finance and marketing, I was divorced. Nobody in my family or community would speak to me.

Q. What were your first steps after leaving your marriage and community?

A. I had $30,000 that I’d saved up and used for a down payment on an apartment. I was always saving. When I was younger, I worked for my mom, who’s a dentist, in her office. As a little kid, I ran day camps and carnivals, so I saved money from that. But most of it came from buying and selling cars online, which I did for about a year and a half.

Q. How did you get involved in that?

A. Where I grew up, no one cares about material things. But I loved cars. I bought my first car, a Jeep Grand Cherokee Laredo, at 18, sold it a few years later and made a $4,000 profit. So I kept doing it. When I was 20, I met a guy who sold used cars in Queens, and I asked if I could learn the business. I saw that plenty of people were buying used cars — and eBay Motors had just come out.

Q. What was your first real job after graduating from college?

A. Working as an associate at an interactive marketing firm. When I started in 2008, I didn’t even know what Outlook was. I was making money, but I’d never had a proper job. I figured I needed to learn a thing or two. On the job, I couldn’t tell people I didn’t know how to do something, so I’d just Google it. After four months, I was promoted to director of digital marketing.

Q. How did you even get hired?

A. A religious friend of mine worked at the company. He helped me with my résumé — we got really creative — and he taught me what I needed to know to go on an interview and be a marketing expert. I killed it in the interview.

Q. When did you leave the firm?

A. After about a year and a half — eight months after I founded MOD.

Q. Why furniture repair?

A. While working at the marketing firm, I met Sim Fern, who was 24, like me, and repairing furniture for Jennifer Convertibles. I thought it was fascinating that someone our age was fixing furniture — who does that? I suggested he start his own company, but he said, “No, that’s not for me.” I told him that if he wasn’t going to do it, I would. So I started the company. Then I convinced him to quit his job and come onboard once we got our first customer. We got married that year. He’s now MOD’s vice president — and we’re in the process of getting divorced, while remaining business partners.

Q. Who was your first customer?

Article source: http://www.nytimes.com/2013/12/26/business/smallbusiness/an-entrepreneur-who-wouldnt-be-stopped-by-anything.html?partner=rss&emc=rss

Smaller and newer e-commerce businesses often find this practice especially appealing (although Amazon.com uses it, too). Unlike pay-per-click advertising, which charges merchants every time someone clicks on a link to their site, affiliate marketing costs nothing unless there is a sale — at which point a commission, typically between 4 and 20 percent, is paid. It has become an essential part of the online marketing toolbox, generating fees that Forrester Research projects will reach $3.4 billion next year.

But affiliate marketing has a dark side: It can be a sure path to getting defrauded. Even Santa Claus is vulnerable. Within hours of joining an affiliate network, the Santa Claus store had two dozen websites signed on as affiliates and claiming commissions. “We were, like, ‘Wow, that was easy,’ “ said Andy Teare, the store’s general manager.

Eventually, however, Mr. Teare and his staff looked more closely at their analytics and noticed a curious pattern. Over and over, a shopper would arrive at the checkout page and then disappear for several minutes before returning to make the purchase. These affiliates were claiming a commission on sales the store would have made anyway.

“What we realized,” Mr. Teare said, “is that these customers were already on our site and prepared to buy, but at checkout they were Googling to see if any coupons were available. Because these new affiliates were advertising that they had special coupons for our store, customers were immediately clicking over there. The only problem is we didn’t have any coupon promotions running at the time.”

Fortunately, Mr. Teare said, he paid only about $150 in commissions before figuring out what was going on. He hired an outside program manager to vet affiliates. Other companies, however, have not been so lucky.

This year two affiliate marketers based in California, Shawn Hogan and Brian Dunning, pleaded guilty to defrauding eBay of at least $20 million in a scheme involving a notorious affiliate marketing tactic known as “cookie stuffing.” According to court documents, Mr. Hogan operated a network in which affiliates exchanged links and banner ads to help drive traffic to each other’s sites. The sites also agreed to host ads controlled by Mr. Hogan’s company, but in reality, these ads were cookie-stuffing devices. Users who viewed the ads had a small tracking code, or cookie, dropped on their computer. If those users went on to make a purchase from eBay, the cookie signaled that Mr. Hogan’s company was responsible — and eBay paid a commission.

None of this is to suggest that all affiliates are dishonest or that merchants should avoid affiliate marketing. But it does call for vigilance.

First, retailers need to do their homework. Kush Abdulloev runs the affiliate marketing program for VMInnovations, a retailer of home products and outdoor equipment based in Lincoln, Neb., that logged $2 million in affiliate-generated sales last year — roughly 20 percent of the company’s online revenue. When it introduced the program two-and-a-half years ago, Mr. Abdulloev said, no one at VM Innovations knew the first thing about affiliate marketing. He started by reading a book, “Affiliate Program Management: An Hour a Day.”

Shortly thereafter, Mr. Abdulloev joined the affiliate marketing forum on a site called ABestWeb. In addition to serving as a kind of industry police blotter on the latest frauds, the forum is a good way for merchants to stay abreast of important developments, like the shifting local sales tax landscape. (Thirteen states have laws that require merchants working with affiliates in those states to charge sales tax, but the issue is constantly being litigated.)

He also started attending the three-times-a-year Affiliate Summit marketing conference and other trade shows. “You’d be surprised at how much of a relationship business this is,” he said. “There are thousands upon thousands of affiliates out there, but you come to realize that a lot of the good ones all seem to know each other and there’s as much suspicion of merchants cheating affiliates out of commissions as the other way around.”

Next, retailers have to decide which affiliate network to use. The networks provide the back-end technology needed to operate an affiliate program: software that tracks which sales should be attributed to which affiliates; an easy way for affiliates to upload advertising banners and logos; accounting systems that debit a merchant’s account and issue payments to affiliates for their commissions. The networks typically charge merchants a flat fee of $500 a month or 20 to 30 percent of affiliate payments (whichever is higher).

Networks are the best source for determining the going commission rate among competitors. Before joining a network, most merchants or program managers sign up with a couple of the larger ones as an affiliate. This gives them access to the network’s database, and they can do a search for the starting commissions being paid out by other businesses in their industry to get a feel for how much they can charge.

Among the networks, Commission Junction and Rakuten LinkShare are the largest, with deep rosters of affiliates. ShareASale is smaller, but is considered stricter when it comes to policing members, according to several program managers interviewed. It has also been vigorous about encouraging affiliates to abide by new Federal Trade Commission regulations that require bloggers to disclose when they are receiving compensation in return for products they endorse.

Once the basics have been mastered and a network selected, retailers have to decide whether they are going to run the program in-house or hire an outside manager (or both). Milan Jara owns Decorative Ceiling Tiles, an online retailer with a little more than $1 million in annual sales. For three years, he ran his affiliate marketing program himself, learning by trial and error how to pick affiliates and spot coupon abuse.

To his surprise, he discovered several affiliate marketers were willing to build entire websites to promote their retailing partners. BetterCeilings, a site that one of these affiliates developed on Mr. Jara’s behalf, features dozens of articles and videos with tips on choosing the right type of tile and installation — all linking back to Mr. Jara’s site.

“It was like a way of outsourcing a great new website except I didn’t have to pay any money upfront,” he said. “The woman who built it for me will probably end up making more than if I paid her on a project basis, but I don’t mind because I know it’s working.”

Still, Mr. Jara began to suspect that his program was leaking improperly earned commissions. So he hired Adam Riemer, a program manager based in Washington, who alerted Mr. Jara that some affiliates were cookie-stuffing his site. Mr. Riemer also toughened the language in Mr. Jara’s terms and conditions statement for affiliates.

Of the 750 affiliates that had been working with Decorative Ceiling Tiles, Mr. Riemer suggested severing ties with about a third. As a result, Mr. Jara has seen his affiliate-generated sales drop from about $20,000 a month to less than $10,000. But he said he is not disappointed.

“With Adam’s help we’re going to build it back up the right way,” he said. “Besides, all the sales we’re getting now I know are real.”

Article source: http://www.nytimes.com/2013/12/05/business/smallbusiness/surviving-the-dark-side-of-affiliate-marketing.html?partner=rss&emc=rss

If you’re a borrower having trouble with the company that handles your student loans, you may be interested to learn that the federal Consumer Financial Protection Bureau will soon begin scrutinizing practices of the largest loan servicers, the companies that manage loans on behalf of lenders.

The bureau announced on Tuesday that it issued a new rule giving it supervisory authority over big “nonbank” companies that service student loans.

The bureau already had oversight over student loan servicing by big banks, but most student debt is serviced by companies that aren’t banks. Officials with the bureau say the rule plugs a major gap in the oversight of student loan servicing. Student debt now totals about $1.2 trillion, and the bureau estimates that seven million borrowers are in default on their loans.

Servicers are companies that send out statements, collect and track payments, process requests for loan deferments, report borrower activity to credit reporting agencies and answer questions from borrowers. The servicer of a loan is often different from the original lender, but serves as the borrower’s main point of contact for the debt.

The new rule, which takes effect March 1, lets the bureau ensure that servicers are complying with all federal consumer protection laws, like the Fair Credit Reporting Act, and aren’t subjecting borrowers to abusive practices. The bureau’s oversight will include analysis of data from servicers as well as on-site examinations.

“We will be keeping a watchful eye over any servicing company that engages in unfair or deceptive acts or practices toward student loan borrowers,” said Richard Cordray, the bureau’s director, in a phone call with reporters.

The rule applies to nonbank servicers that manage at least one million accounts. The bureau said it estimated that the rule gave it authority over the seven largest loan servicers, whether they handle loans made by the federal government or those made by private lenders. The bureau said it would “continue to coordinate closely” with the federal Education Department, which originates most student loans.

The seven combined manage more than 49 million borrower accounts and represent most of the activity in the student loan servicing market, the bureau said.

The bureau’s policy is not to identify the biggest nonbank servicers by name. But according to 2012 data from the Student Loan Servicing Alliance, a trade group, Sallie Mae is by far the largest.

“As the largest servicer of student loans, we have been engaged with the C.F.P.B. in the review of our lending, servicing and collections operations,” said a Sallie Mae spokeswoman, Patricia Christel.

The bureau has been collecting complaints about loan servicing from borrowers, who cited problems like having difficulty getting payments properly applied to their balance when they tried to prepay loans. Because options to refinance student loans at lower rates are limited, some borrowers choose to reduce their debt by paying down the loan early. Some borrowers complained that servicers don’t always apply the payment to their highest-interest loan first, which would save them the most money. Borrowers also complained that when loans were transferred between different servicers, they often encountered delays in having payments processed, resulting in late fees and possible damage to credit scores.

As a result of the findings, the bureau’s student loan ombudsman, Rohit Chopra, last week asked some servicers of private loans to voluntarily disclose details of their payment processing policies.

Mr. Cordray said, “Student loan borrowers should be able to rest assured that when they make a payment toward their loans, the company that takes their money is playing by the rules.”

Here are some questions to consider:

■ How can I make a complaint about my loan servicer?

You can go to the bureau’s website at www.consumerfinance.gov/students/

■ Does it matter if my loans were made by the federal government, or by a private lender?

A bureau spokeswoman said borrowers could lodge complaints with the consumer bureau, which will share the information with the Education Department “as appropriate.”

■ Where can I get more information about the new rule?

A fact sheet is available on the consumer bureau’s website.

Email: yourmoneyadviser@nytimes.com

Article source: http://www.nytimes.com/2013/12/03/your-money/student-loans/consumer-watchdog-to-monitor-student-loan-servicers.html?partner=rss&emc=rss

The problem is that so-called back end systems, which are supposed to deliver consumer information to insurers, still have not been fixed. And with coverage for many people scheduled to begin in just 30 days, insurers are worried the repairs may not be completed in time.

“Until the enrollment process is working from end to end, many consumers will not be able to enroll in coverage,” said Karen M. Ignagni, president of America’s Health Insurance Plans, a trade group.

The issues are vexing and complex. Some insurers say they have been deluged with phone calls from people who believe they have signed up for a particular health plan, only to find that the company has no record of the enrollment. Others say information they received about new enrollees was inaccurate or incomplete, so they had to track down additional data — a laborious task that would not be feasible if data is missing for tens of thousands of consumers.

In still other cases, insurers said, they have not been told how much of a customer’s premium will be subsidized by the government, so they do not know how much to charge the policyholder.

In trying to fix HealthCare.gov, President Obama has given top priority to the needs of consumers, assuming that arrangements with insurers could be worked out later.

The White House announced on Sunday that it had met its goal for improving HealthCare.gov so the website “will work smoothly for the vast majority of users.”

In effect, the administration gave itself a passing grade. Because of hundreds of software fixes and hardware upgrades in the last month, it said, the website — the main channel for people to buy insurance under the 2010 health care law — is now working more than 90 percent of the time, up from 40 percent during some weeks in October.

Jeffrey D. Zients, the presidential adviser leading the repair effort, said he had shaken up management of the website so the team was now “working with the velocity and discipline of a high-performing private sector company.”

Mr. Zients said 50,000 people could use the website at the same time and that the error rate, reflecting the failure of web pages to load properly, was consistently less than 1 percent, down from 6 percent before the overhaul.

Pages on the site generally load faster, in less than a second, compared with an average of eight seconds in late October, Mr. Zients said.

Whether Mr. Obama can fix his job approval ratings as well as the website is unclear. Public opinion polls suggest he may have done more political damage to himself in the last two months than Republican attacks on the health care law did in three years.

People who have tried to use the website in the last few days report a mixed experience, with some definitely noticing improvements.

“Every week, it’s been getting better,” said Lynne M. Thorp, who leads a team of counselors, or navigators, in southwestern Florida. “It’s getting faster, and nobody’s getting kicked out.”

But neither Mr. Zients nor the Department of Health and Human Services indicated how many people were completing all the steps required to enroll in a health plan through the federal site, which serves residents of 36 states.

And unless enrollments are completed correctly, coverage may be in doubt.

For insurers the process is maddeningly inconsistent. Some people clearly are being enrolled. But insurers say they are still getting duplicate files and, more worrisome, sometimes not receiving information on every enrollment taking place.

“Health plans can’t process enrollments they don’t receive,” said Robert Zirkelbach, a spokesman for America’s Health Insurance Plans.

Despite talk from time to time of finding some sort of workaround, experts say insurers have little choice but to wait for the government to fix these problems. The insurers are in “an unenviable position,” said Brett Graham, a managing director at Leavitt Partners, which has been advising states and others on the exchanges. “Although they don’t have the responsibility or the capability to fix the system, they’re reliant on it.”

Jess Bidgood, Dan Frosch and Jennifer Preston contributed reporting.

Article source: http://www.nytimes.com/2013/12/02/business/white-house-praises-gains-on-health-site.html?partner=rss&emc=rss