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You’re the Boss: This Week in Small Business: Repeal the Tanning Tax!

June 13, 2011 by Leave a Comment

Dashboard

What’s affecting me, my clients and other small-business owners this week.

BERNANKE SPEAKS, THE MARKET DROPS In a speech, Ben S. Bernanke, the Federal Reserve chairman, predicts stronger growth ahead, but the markets do not believe him. Lawrence White, economics professor, says the Fed chief is just hoping for the best. Tim Duy tells us not to expect any more help from the Fed: “Federal Reserve officials accept the economy at face value – growth is slower than they would like, unemployment higher than they would like, but policy makers, fiscal and monetary, believe they are pretty much out of bullets.” The federal budget deficit totals $929 billion for the first two-thirds of the year. And the world thinks we’re hilarious.

THREE ECONOMISTS, THREE OPINIONS Martin Feldstein says the economy is worse than we think. Scott Grannis is encouraged by the decline in credit card delinquencies and healthier financial markets. Robert Reich just blames the Republicans. Obama’s economic spokesman quits. (Me? I’m thinking of changing my religion.)

WILL WORK FOR BEER The National Federation of Independent Business says that job creation is collapsing on Main Street. But another survey says that small businesses are hiring. Gallup’s Job Creation Index stays about the same. The research firm IBIS World identifies the top 10 industries that are hiring. The Bureau of Labor Statistics says there has been a net gain (PDF) of 1.2 million jobs over the last 12 months. And jobs are so tight in Silicon Valley that a firm is offering applicants $10,000 and a year’s supply of beer.

COPING WITH STRESS An Associated Press analysis concludes that our economic stress is at a two-year low (but here’s one exception). United States rail traffic rises. Record exports reduce the trade deficit. The Ceridian-U.C.L.A. Pulse of Commerce index falls. The forecast for Alaskan small businesses is promising. Iceland is the most peaceful place in the world. A National League of Cities survey shows glimmers of hope. Another survey says small businesses are cautiously confident.

GETTING RICHER, FEELING POORER A new study says that most Americans are not preparing for retirement; another finds that 44 percent will never invest again. But the top 1 percent are earning more income, and keeping more of it, than at any time since the 1920s. And household net worth increased $10 trillion in the last two years.

TWO AND A HALF BUSINESS MEN An Internet comedy series about entrepreneurs has its debut.

HEALTH CARE HERE AND THERE A new report says that taxes and health care costs put the United States in line with Europe. Ezra Klein says that government health care works: “Canada has a single-payer health-care system. The government is the only insurer of any note. The United Kingdom has a socialized system, in which the government is not only the sole insurer of note but also employs most of the doctors and nurses and runs most of the hospitals. And yet, measured as a share of the economy, our government health-care system is the largest of the bunch.” Roger Chittum writes that Canada has lousy health care. A Rasmussen poll finds that 54 percent favor repeal of the health care law and 56 percent say the law will increase the deficit. States are slow to adopt to the transition. Perhaps eliminating playground equipment like this would reduce health care costs?

NO HAIR BRAIDS? I’M NOT CONCERNED The White House considers a payroll tax break. The Senate defeats an attempt to delay debit card fee reform. John Whitehead says a good thing came out of the recession: state park fees. House Republicans file a bill to repeal the tanning tax. A man gets cited for paying his bill with 2,500 pennies. Ryan Young’s regulation of the day is about braiding hair.

GET OFF OF MY CLOUD! Bob Cringely says that Apple’s iCloud is designed to kill Windows: “Apple and Google will compete like crazy for our data because once they have it we’ll be their customers forever. This transition will take at most two hardware generations and we’re talking mobile generations, which means three years, total. With no mobile market share to speak of and Windows 8 not due until 2013, Microsoft is likely to be too late to the party, with much of Redmond’s market cap transplanted eventually to Apple and Google.” A Microsoft vice president says the company is “far from the living dead” and continues to pursue important patents like flicking your pen.

MY MEMORY IS ALREADY DISABLED Skype goes down again. Citigroup gets hacked. Twitter can now automatically shorten URLs. Paul Mah says that disabling virtual memory is one of six ways to get a better laptop experience. Juniper projects NFC mobile payments will approach $50 billion globally by 2014. Many small businesses are developing their own apps.

REALLY? IT WAS JUST A STUNT? TechCrunch’s Alexia Tsotsis explains what @RepWeiner can teach us about online life. John Jantsch explains how to use the Google +1 button. Patrick Schwerdtfeger tells us how to re-purpose our content online: Example: “You could even use a distribution platform like iSnare.com to get it on hundreds of article directories within days. Each directory will allow you to include a link back to your Web site so this strategy will result in hundreds of one-way inbound links to your Web site.” The girl with 152 Facebook friends tattooed on her arm admits it was just a stunt. Speaking of stunts, there’s no way this baby is for real, right?

NOT A FAN OF GROUPON Ilie Mitaru explains what’s wrong with Groupon for small businesses. One example: “By offering your products or services at such steep discounts, you are implicitly saying that your company is willing to be flexible — very flexible — with the value you place on your products or services.” The benefits of social media to small business are catching up to e-mail. Michael Schrage explains how we can manage ourselves better with our smartphones.

OUT TO LUNCH Robert Scoble is having lunch with Ashton Kutcher and needs some advice. My advice: do not invite this kid. Or, just grab a couple of million and lunch with Warren Buffett.

WHAT’S THE DIFFERENCE? Steve Landsburg takes a stab at why some hotels charge for Wi-Fi and others do not. Researchers at Kellogg Insight explain why we trust some people. Morningstar’s Jascelyn Mackay reports that there’s no ‘Easy’ button for office products distributors. Wray Rives explains the differences between a C.P.A., an enrolled agent and a bookkeeper. Ramon Ray says there has never been a better time to be a small retailer. Jeff Beals shares a lesson from the mall: “Today’s harried shopper simply doesn’t have the time to spend the whole day at the mall. Speed and convenience are critically important. Shoppers still want luxury and entertainment, but they have to be easily accessible and located close to homes or offices.”

GREAT IDEAS (MOSTLY) Two new companies claim to reduce computer chip power usage and lower the cost of energy. A Wisconsin company gets $11 million to figure out a cure for cancer. A start-up gets $2 million, but no one seems to know what it does. Female prison inmates are taught how to start a small business. Many M.B.A.’s get a taste of the corporate life before venturing out alone. And just what the world needs: a Rocky musical!

THE WEEK AHEAD A busy week for data: retail sales (Tuesday), producer and consumer prices (Tuesday and Wednesday), building permits (Thursday), the Philly Fed manufacturing index (Thursday), the University of Michigan’s consumer sentiment survey (Friday). And, no matter how mortifying your dad is, don’t forget him Sunday.

THIS WEEK’S AWARDS

BEST CUSTOMER SERVICE LESSON An associate editor at Harvard Business Review learns the secret of customer service from, yes, an Amtrak employee: “”You’ll just do that? Just like that? That’s, that’s amazing,” I sputtered.

BEST IDEAS TO INCREASE REVENUE Dan Kennedy and Jason Marrs offer three ways to raise prices without losing customers. Example: “Upgrade your venue. The importance of context when it comes to buying can’t be underestimated. The difference in price between a face cream sold at a Walgreens Co. store and one sold in the home by Mary Kay, or at a cosmetic counter at higher-end stores such as Saks or Neiman Marcus, or at an exclusive Parisian boutique can be disproportionate to the difference in the product’s ingredients. The price is governed by the expectations of the consumer largely based on where they are buying it, the brand and the expertise of the salesperson — not the product.”

BEST EXCUSE TO PLAY GOLF Lou Dubois shares business lessons learned on the golf course, such as “contrary to popular belief, though, deals are rarely closed on the golf course. If you approach the round with that sole intention, you’re likely to leave without a contract — and with a ruined relationship. Good things take time, and golf provides a relatively low-stress, tension-free look into business executives.”

THIS WEEK’S QUESTION What do you think is the secret to customer service? At my company, we try to resolve problems the same day.

Gene Marks owns the Marks Group, a Bala Cynwyd, Pa., consulting firm that helps clients with customer relationship management. You can follow him on Twitter.

Article source: http://feeds.nytimes.com/click.phdo?i=8b8d4734e48d1a4ca65d811626b2b4d0

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Analysts Wary of LinkedIn’s Stock Surge

May 23, 2011 by Leave a Comment

In a sizzling debut last week on the New York Stock Exchange, investors sent stock in LinkedIn, the social-networking site for business professionals, soaring 109 percent on its first day of trading. While the enthusiasm subsided a tad the next day, LinkedIn’s shares still closed the week at around $93, more than twice the company’s initial offering price. This put the value of the company, which made $15 million in profit last year, at more than $8 billion.

From Wall Street to Silicon Valley, the debate was whether this stunning performance echoed the late 1990s, when the bubble around dot-com companies began to inflate. On its first day of trading in 1995, Netscape stock doubled in price. Yahoo shares rose 154 percent on its 1996 offering. TheGlobe.com shot up to $97 from $9 in its first day of trading in 1998, giving it a valuation of about $850 million.

LinkedIn’s first-day trading gain was the fifth highest since 2001, but the top three were Chinese Internet stocks like Baidu, which zoomed 354 percent on its debut in 2005, with Nymex No. 4.

“In both cases, the Internet bubble of the late 1990s and now, investors are assigning some very optimistic valuations,” said Jay Ritter, a professor of finance at the University of Florida.

Still, many people are hesitant to proclaim that the markets are on the cusp of another tech bubble or that the markets are returning to the days when unprofitable new companies could be valued at billions of dollars. In those days, companies without earnings were assessed with measurements like “eyeballs,” the number of people who visited a site; “stickiness,” how long they visited; and even “mindshare,” how aware the public was of the company or category.

“LinkedIn is not a company you have to value on page views. We’re not talking about a start-up here,” said Matt Therian, a research analyst at Renaissance Capital, based in Greenwich, Conn. “This is a company that grew revenues by 110 percent in the first quarter and, on top of that, it’s actually turned a profit.”

By far, the hottest segment of the Internet market is social media companies. The social buying site Groupon, which raised $1 billion from investors in January, is said to be considering an offering that could value the company at $20 billion.

And the barometer for the segment, Facebook, which is widely expected to go public next year, has rocketed higher in the private secondary markets with its shares trading at an implied valuation of as much as $80 billion in recent months.

As the first social media company out of the gates into the public markets, LinkedIn benefited from all of the attention Facebook has ginned up.

“Do you really imagine that LinkedIn could have gotten this valuation if not for the excitement of Facebook?” asked Kevin Landis, the chief investment officer of Firsthand Funds, which rode the tech boom and bust a decade ago. “I don’t know anybody who could make that case.”

LinkedIn’s valuation, many analysts say, is partly a function of investor demand for all things social media but also related to the fact that a limited number of shares — nine million — were issued. Those shares traded 30 million times in the first day.

Initial public offerings remain rare now, and this scarcity can drive up prices. Only 154 companies went public in 2010, and 63 have so far this year, compared with 486 in 1999.

Of course, the big question is whether LinkedIn is destined to become the next Google or Amazon, or whether it is another TheGlobe.com, which was a penny stock by 2001, when the dot-com bubble burst.

At LinkedIn’s current valuation, investors are clearly betting the company will show phenomenal growth, analysts say. LinkedIn is trading at about 554 times last year’s earnings of $15 million (the company posted losses in 2008 and 2009).

That compares with a price-to-trailing-earnings ratio of 149 when Google made its debut in the markets or, in a more extreme example, the 947.5 ratio eBay received in its first day of trading, according to data from Mr. Ritter.

Price-to-earnings comparisons for other hot Internet companies, like TheGlobe.com or even Netscape on their opening days, are difficult as they did not have any earnings.

By another closely watched measurement, LinkedIn is trading at around 25 times this year’s expected sales, said Rick Summer, a senior equity analyst at the Chicago research firm Morningstar.

That’s high, and Mr. Summer says LinkedIn could increase its revenue to $1.5 billion in five years, from $243 million last year. That makes LinkedIn worth about $27 a share, by his estimate.

With LinkedIn shares trading at $93, investors are betting the company’s revenue will rise to $4 billion in five years, Mr. Summer said.

Impossible? No. Difficult? Yes, say analysts.

But that valuation makes sense if an investor believes someone would pay even more for the stock. And that’s how bubbles form.

LinkedIn, which has about 100 million members, does have a revenue model. It offers what is called a freemium business model: users can create free profiles or they can pay a subscription fee for a premium account with special features.

LinkedIn also charges businesses and recruiters for hiring. Although the company is still growing quickly, it faces tough competition from other sites, like the job listing services Monster and CareerBuilder.

The company has repeatedly said it plans to invest in its platform, at the expense of short-term profit, a move that is potentially good for the company over the years, but could make it tough for investors to justify current market valuations, analysts warn.

Mr. Summer said, “We think it’s a very good financial model and a good business, but at these valuations, it’s potentially, ‘Watch out below.’ ”

Article source: http://feeds.nytimes.com/click.phdo?i=fd6cff0320031e46c0bf237e6086371e

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Your Money: Companies Make Life More Equal for Gay Employees

May 20, 2011 by Leave a Comment

These companies are reaching into their own pockets to pay for an extra tax that their gay employees owe on their partners’ health insurance — something that their heterosexual co-workers don’t have to worry about because the federal government recognizes them as an economic unit.

To gay employees, gaining equal benefits is about more than the money. The gesture itself validates their relationship with their partners at a time when the government has not.

Most heterosexuals take for granted that they can add a spouse or children to their employer’s health plan. But gay employees with partners have that option only if they work for an organization that offers domestic partner coverage. And even when the coverage is available, it costs gay couples more because they are taxed on the value of those benefits.

Over the last year, however, as the word has gotten out about this inequity, more companies have begun to “gross up” these workers, as the policy is known.

“It very quickly became a litmus test among employees for how welcoming their firm was,” said Daryl Herrschaft, director of the workplace project at the Human Rights Campaign. “A lot of folks were very proud of their companies and wanted to tell a lot of people, and in doing so, it sparked some competition.”

The competition has become most apparent in a handful of industries, notably law firms, big consulting companies and in Silicon Valley. More Wall Street firms, meanwhile, are said to be considering the policy. Skadden, Arps, Slate, Meagher Flom, the New York law firm, is the latest firm to follow suit. And Teach for America, the nonprofit teaching program, adopted the policy earlier this month after initially learning about it on Bucks, the personal finance blog on The New York Times Web site, where we’ve been singling out the companies that gross up and those that do not.

“We realized that it was the right thing to do and we were in a position to do it, so we did,” said Aimée Eubanks Davis, chief people officer at Teach for America.

A small number of organizations, including Kimpton Hotels and Cisco, have had the policy in place for several years. But it wasn’t until Google started compensating its employees last June that the movement really begin to take off. Apple, Facebook, Barclays, McKinsey and Bain Company are some of the prominent names that followed suit.

Even more companies have said they publicly support same-sex marriage or equal financial treatment for gay couples, but they haven’t gone as far as adopting the policy.

About 58 percent of Fortune 500 companies extend domestic partner coverage to employees with same-sex partners, according to the Human Rights Campaign. But when you look at a broader group of companies, the numbers shrink: Only about 36 percent of large companies, or those with more than 200 workers, offered the coverage in 2009, according to a Kaiser Family Foundation survey. About 20 percent of small companies offered the coverage.

Even as the number of companies that “gross up” increases, they remain a distinct minority. (The online version of this column links to our running list of companies.) In fact, a large group of major corporations joined a coalition, led by the Human Rights Campaign, that supported legislation to eliminate the tax, but most of them don’t gross up their own employees.

Another group of prominent business leaders recently signed an open letter urging New York lawmakers to legalize same-sex marriage, arguing that it would help attract and retain talent. But not everyone on that list, including Lloyd A. Blankfein of Goldman Sachs, for instance, has started to gross up employees within their own offices. That would also, arguably, help attract and retain talent. Both Goldman and Morgan Stanley (whose board chairman, John J. Mack, also signed the letter) said they were reviewing their policies. So we’ll see what happens.

One of the biggest obstacles to adopting the gross up policy has been concern about the cost and legal implications. Will people rush to sign up? Many firms, for instance, decided to make only same-sex employees with domestic partners eligible since opposite-sex couples have the option to marry.

“To spend money to make up for the inequities for our government and our governmental policies is a very significant thing,” said Ross Levi, executive director of the Empire State Pride Agenda, a gay rights organization in New York. “Companies shouldn’t have to be making up for the ways that government is failing its L.G.B.T. people and our families,” he added, referring to lesbian, gay, bisexual and transgender people. That said, he added that the private sector had historically “led government in terms of equality for L.G.B.T. people.”

Generally, it would cost an employer about $2,000 to $2,500 to gross up an employee who incurred extra taxes of $1,200 to $1,500, according to Joseph S. Adams, a partner at McDermott Will Emery who specializes in employee benefits. The numbers will vary depending on several factors, including the employee’s tax bracket and state of residence. This example assumes a 25 percent federal tax bracket (and includes rough estimates for state, local, and employment taxes for Social Security and Medicare, bringing the total tax rate to about 40 percent).

On average, a typical employee with a domestic partner will pay about $1,069 more a year in taxes than a married employee with the same coverage, according to a 2007 report by Lee Badgett, research director of the Williams Institute, which studies sexual orientation policy issues. (That figure, which is bound to be higher now given escalating health care costs, includes taxes on the benefit itself as well as the money employees would save if they could pay for their benefits using pretax dollars like heterosexual employees can. There is an exception: If the partner is considered a dependent, the extra taxes aren’t levied.)

At Barclays, which began compensating gay employees at the beginning of the year, the team working on the policy considered how it might affect their expenses. But when Barclays looked at the numbers, they concluded the cost was “not material.” And, in any case, they said it was the right thing to do.

“Too often people come with ideas requiring creativity and people start explaining obstacles about why you can’t do it,” said Jeffrey G. Davis, managing director and co-chairman of Barclays’ L.G.B.T. employee group. So they worked with their human resources department to find ways to make it as simple as possible. Instead of reimbursing employees in every paycheck, for instance, they provide a lump sum at the end of the year. “It’s not perfect, but as close to perfect as you can make it.”

His advice to others who want to lobby their own employers is to “anticipate peoples’ concerns and questions before you go to them for approval, so you have the right answers.”

“That is the biggest part of the effort,” he said.

The Human Rights Campaign has materials on its Web site to help guide employees and their companies through the process, too.

With more companies adopting the more generous policy, others are now looking at whether they’re offering the basics for gay employees. As Cynthia Yeung, a San Francisco resident who is on the steering committee of her employer’s L.G.B.T. group, put it, “When you raise the bar, everyone has to jump a little higher to be average.”

Article source: http://feeds.nytimes.com/click.phdo?i=eb705480253616a9a46fb49a868dbdb2

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The Class That Built Apps, and Fortunes

May 7, 2011 by Leave a Comment

ALL right, class, here’s your homework assignment: Devise an app. Get people to use it. Repeat.

That was the task for some Stanford students in the fall of 2007, in what became known here as the “Facebook Class.”

No one expected what happened next.

The students ended up getting millions of users for free apps that they designed to run on Facebook. And, as advertising rolled in, some of those students started making far more money than their professors.

Almost overnight, the Facebook Class fired up the careers and fortunes of more than two dozen students and teachers here. It also helped to pioneer a new model of entrepreneurship that has upturned the tech establishment: the lean start-up.

“Everything was happening so fast,” recalls Joachim De Lombaert, now 23. His team’s app netted $3,000 a day and morphed into a company that later sold for a six-figure sum.

“I almost didn’t realize what it all meant,” he says.

Neither did many of his classmates. Back then, Facebook apps were a novelty. The iPhone had just arrived, and the first Android phone was a year off.

But by teaching students to build no-frills apps, distribute them quickly and worry about perfecting them later, the Facebook Class stumbled upon what has become standard operating procedure for a new generation of entrepreneurs and investors in Silicon Valley and beyond. For many, the long trek from idea to product to company has turned into a sprint.

Start-ups once required a lot of money, time and people. But over the past decade, free, open-source software and “cloud” services have brought costs down, while ad networks help bring in revenue quickly.

The app phenomenon has accentuated the trend and helped unleash what some call a new wave of technology innovation — and what others call a bubble.

Early on, the Facebook Class became a microcosm of Silicon Valley. Working in teams of three, the 75 students created apps that collectively had 16 million users in just 10 weeks. Many of those apps were sort of silly: Mr. De Lombaert’s, for example, allowed users to send “hotness” points to Facebook friends. Yet during the term, the apps, free for users, generated roughly $1 million in advertising revenue.

Such successes helped inspire entrepreneurs to ditch business plans and work on apps. Not all succeeded, but those that did helped to fuel the expansion of Facebook, which now has nearly 700 million users.

Venture capitalists also began rethinking their approach. Some created investment funds tailored to the new, bare-bones start-ups.

“A lot of the concepts and ideas that came out of the class influenced the structure of the fund that I am working on now,” says Dave McClure, one of the class instructors and founder of 500 Startups, which invests in lean start-ups. “The class was the realization that this stuff really works.”

Nearly four years later, many of the students have learned that building a business is a lot harder than creating an app — even an app worthy of an A+.

“Starting a company is definitely more work,” says Edward Baker, who was Mr. De Lombaert’s partner in the class and later in business. The two have founded Friend.ly, a social networking start-up.

Still, many students were richly rewarded. Some turned their homework into companies. A few have since sold those businesses to the likes of Zynga. Others joined hot start-ups like RockYou, a gaming site that at the time was among the most successful Facebook apps.

The Facebook Class changed Mr. De Lombaert’s life. His team’s app, Send Hotness, brought in more users and more money faster than any other in the class. And its success attracted the attention of venture capitalists.

“The class, more than anything, set the tone for us to try to start something big,” says Mr. Baker, 32, Friend.ly’s C.E.O.

When the Send Hotness app began to take off, Mr. Baker encouraged Mr. De Lombaert to treat himself to a new car. Mr. De Lombaert settled for a laptop. (He also put some money aside to help to pay his Stanford tuition.) They eventually sold the app to a dating Web site.

Facebook did not actively participate in the Stanford class. But some of its engineers attended sessions, and it benefited from the success of the students’ apps. “It really felt like an incubator,” says David Fetterman, a Facebook engineer who helped develop the applications platform.

Article source: http://feeds.nytimes.com/click.phdo?i=f753b0a7652d4563f8340baf52161bca

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