September 26, 2017

You’re the Boss Blog: Does Your Business Face Foreign Currency Exposure?

Jean-Paul Tennant of Geographic Expeditions said foreign-currency fluctuations “can totally kill a company like ours.’’Peter DaSilva for The New York Times Jean-Paul Tennant of Geographic Expeditions said foreign-currency fluctuations “can totally kill a company like ours.’’

Today’s Question

What small-business owners think.

Jean-Paul Tennant is chief executive of a travel company, Geographic Expeditions, that specializes in arranging ambitious trips to exotic lands. In late 2006 — as explained in our just-published small-business guide to handling foreign-currency exposure — Mr. Tennant booked travel for eight clients who wanted to explore northern India.

And then the rupee began a double-digit climb against the dollar, which prompted one Indian supplier who had already agreed to fees for hotel rooms, guides and drivers to say he needed to raise his prices. Suddenly a trip costing Geographic Expeditions $7,500 per person was going to jump to $9,000. “As soon as we commit to a price, we are heavily exposed if we don’t know what our costs will be,’’ Mr. Tennant said. “It can totally kill a company like ours.’’ Mr. Tennant quickly canceled the contract and found another supplier that agreed to a firm quote.

And then he looked for some better ways to handle currency risk. Please read the guide and tell us whether your company faces similar exposure and how you have learned to mitigate it.

Article source: http://boss.blogs.nytimes.com/2013/04/17/does-your-business-face-foreign-currency-exposure/?partner=rss&emc=rss

You’re the Boss Blog: Do You Track Your Site’s Conversion Rates?

Today’s Question

What small-business owners think.

Last year, Dr. Stephen Bracci, owner of Verve Medical Cosmetics, realized that his Web site was doing a better job attracting visitors than it was converting those visitors into customers. As Katherine Reynolds Lewis explains in a small-business guide we’ve just published, there are a lot of things a business can do to improve its conversion rates.

Last year, Dr. Bracci and his wife Michele, the company’s director of marketing, redesigned the site to emphasize the qualities they believe make the business stand out from other nonsurgical medical aesthetics companies. They added before-and-after photos, emphasized Dr. Bracci’s qualifications and 12 years of experience, put their clinics’ physical addresses on the home page and made the offer of a free consultation more visible. They also moved the company’s phone number to the upper right corner of the home page, with a prominent encouragement: “Call Us.”

After the redesign, Verve had a 20 percent increase in the number of qualified phone leads from the site and an 18 percent decline in the average bounce rate — the percentage of visitors who left the site after visiting just one page.

What have you tried to increase conversion rates on your site? What has worked? What hasn’t?

Article source: http://boss.blogs.nytimes.com/2012/09/12/do-you-track-your-sites-conversion-rates/?partner=rss&emc=rss

You’re the Boss Blog: Are Your Employees Really More Productive Working at Home?

Ralph Dandrea, founder of ITX Corporation, manages 128 employees -- many scattered all over the country and all over the world.Heather Ainsworth for The New York Times Ralph Dandrea, founder of ITX Corporation, manages 128 employees — many scattered all over the country and all over the world.

Today’s Question

What small-business owners think.

Ralph Dandrea’s company, ITX Corporation, has 128 employees but only 46 of them report to the main office in Pittsford, N.Y. The rest are scattered internationally (72 in Argentina, plus Peru, Spain, Uruguay and Venezuela) as well as in the United States (California, Missouri, Oregon, Washington,  Virginia). “It’s a lot of fun working this way,” Mr. Dandrea said. “But there are always challenges.”

We have just published a small-business guide to managing remote employees. Please take a look at the guide and tell us if your experiences have been as positive as Mr. Dandrea’s.

It has become commonplace to hear employees say that they actually get more done when they work from home. Is that what your employees say? Is it true?

Article source: http://boss.blogs.nytimes.com/2012/09/05/are-your-employees-really-more-productive-working-at-home/?partner=rss&emc=rss

Small Business Guide: Getting Started as a Social Entrepreneur

“I get the sense that the recession actually has resulted in more people taking interest in investing in companies that are doing the right thing right from the start,” said Wes Selke, investment manager at Good Capital, a social-impact venture capital firm in San Francisco. As one indicator, at least three social-impact funds have raised more than $100 million in the last couple of years: Ignia Fund, Leapfrog Investments and MicroVest.

Marrying mission and money in one business can be tricky. This guide focuses on commercial, profit-making businesses and entrepreneurs who want to build self-sustaining social ventures, a term that encompasses nonprofit and profit-making companies as well as some new types of legal hybrids, like an L3C, which stands for low-profit limited liability company. These ventures are commonly thought of as enterprises that serve a so-called triple bottom line: people, planet and profits.

At a social venture, the social mission is expected to be at least as important as the money-making mission. So, for example, the tobacco giant Philip Morris does not pass the test even though it donates generously to artistic and social causes. But a business that addresses a socioeconomic or environmental challenge as part of its DNA — for instance by selling low-cost solar-powered lanterns to villages that lack electricity — would be considered a social enterprise, according to Deb Nelson, executive director of Social Venture Network, an organization of some 500 chief executives, company founders, nonprofit leaders and investors.

To those looking to start such ventures, social entrepreneurs and investors offer the following pointers.

IT’S O.K. TO MAKE MONEY If you choose the profit-making model, stick with it — without apology. A few years ago, Assaf Shafran founded a nonprofit in Israel that offered a smartphone-based dispatching system for first responders, like firefighters and emergency medical technicians.

But his social venture, called IsraeLife, had an impossible time giving the system away to volunteer organizations, largely because the organizations were suspicious of giveaways — they demanded exclusive rights or they got mired in red tape related to receiving gifts. Mr. Shafran decided he could do more good by selling the systems. In 2008 he and his team formed a profit-making division, called NowForce, which has expanded into the United States. The business has raised $2.5 million from private investors, and Mr. Shafran expects sales to surpass $3 million this year.

Proudly embracing a profit-making model may require focusing on the balance sheet before unleashing the social mission. “You can’t pay employees a livable wage if you don’t have money in the bank,” said Lisa Lorimer, former chief executive of the Vermont Bread Company, which started making organic cookies in 1978.

VENTURE CAPITAL NOT THE SOLE OPTION Financing a social venture can be even more challenging than financing a traditional business. Some entrepreneurs prefer to self-finance with the help of bank loans. Others pursue venture capital, and they accept the loss of control that entails.

Vermont Bread began with a commitment to paying employees a “livable wage” — three to four times more than the minimum wage most competitors offered. It also offered employees health insurance and bought ingredients from local and sustainable farms, which further squeezed margins, according to Ms. Lorimer.

As a result, the company grew deliberately, mostly through bootstrapping and bank financing. At a time when many in the baking business said the company was unrealistic in trying to sell organic goods (with their brief shelf life) and to pay employees a premium, Vermont Bread was able to find a local bank that offered small loans so the fledgling business could buy equipment — one pan, one truck, one pizza oven at a time.

BE WARY OF GROWTH In 2005, James Gutierrez founded Progreso Financiero, a bank based in Mountain View, Calif. It offers small loans, averaging $1,000, to individuals and small businesses with little or no credit history, through staffed kiosks in Hispanic grocery stores and pharmacies in California and Texas. Borrowers often use the loans to buy a delivery truck or other equipment.

Mr. Gutierrez, 33, whose grandparents immigrated to the United States from Mexico, conceived Progreso Financiero as a “social entrepreneuring” research project when he was earning an M.B.A. at Stanford. He wanted to see if microlending, which was taking off in India, could help the millions of immigrants in the United States. He started in one Mexican supermarket in East Los Angeles. Before long he was operating staffed kiosks in 16 Sears and Kmart stores, which he figured would be magnets for many Latino families. “We thought this was a great opportunity, a great way to grow fast,” he said. It did not turn out that way.

Sears and Kmart shut down Progreso’s kiosks because their loan volume was thin. “We found out that the grass-roots supermarkets are where people go three times a week, not the national chain stores,” Mr. Gutierrez said, which ended up being a valuable lesson. The closings prompted Progreso to refocus on what Mr. Gutierrez called the basic building blocks: technology, automated credit scoring (yielding more loans per store per month), and the grass-roots supermarket channel.

Article source: http://feeds.nytimes.com/click.phdo?i=2b115a807fc77fe0048afb0cadf2de88

Small-Business Guide: Basics of Accounting Are Vital to Survival for Entrepreneurs

It is, for example, entirely possible for a company to be profitable but fail anyway because it does not have enough cash coming in to pay its bills.

“It’s like a racecar that goes too fast and runs out of gas,” said Doug Tatum, a serial entrepreneur who is a visiting professor of entrepreneurship at Middle Tennessee State University in Murfreesboro. Business owners do not necessarily need to know how to prepare a balance sheet, but they do have to know which gauges to watch.

One obvious step is to work with a bookkeeper or accountant, someone who can help navigate arcane accounting and tax rules and organize your affairs. But owners should understand that accounting is not just about paying taxes or reporting results.

“Small-business owners tend to hate accounting because it’s boring,” said Brian Hamilton, chief executive of Sageworks, a company in Raleigh, N.C., that tracks financial data for privately held businesses. “The mistake they make is not thinking about how they can use certain numbers as tools to better manage where their business is headed tomorrow.”

What follows is a guide to better understanding the numbers that drive a business. As the examples make clear, even smart people with advanced degrees can become confused by accounting issues. DON’T MISTAKE DEBT FOR PROFIT After earning a master’s degree in industrial engineering, Bart Justice figured he would get a job doing computer simulations or technical sales. Then in 2004, he learned about the paper-shredding industry, which was booming because of a rash of new security laws. Mr. Justice obtained a loan from a local bank to buy a mobile shredding truck, hired a truck driver and opened shop in Huntsville, Ala., as Secure Destruction Service.

The company hit $70,000 in sales its first year. Within four years, Secure Destruction had annual revenue of $500,000 and employed six people across two offices, one in Huntsville, the other in Birmingham, Ala.

To finance his growth — adding a shredding truck, for example — Mr. Justice kept borrowing money from the bank, not realizing that the more he grew, the more he needed to borrow because his revenue was not covering his expenses. The loans meant he had money in his accounts — but it was borrowed money.

“I knew how to print a financial statement from QuickBooks, but I couldn’t tell you what it meant,” he said.

It was not until early 2008 when he joined a peer group for Christian business owners called C12, that Mr. Justice was forced to confront the truth. “They would ask me questions about my numbers, and I didn’t know how to answer them,” he said. “They told me my business was going to fail unless I got a handle on paying down my debt.”

He hired an accountant and began analyzing how aspects of his business were performing, which led him to sell several pieces of equipment and to stop serving clients if he was losing money on them.

The advice proved timely. As the recession set in, the market for shredding collapsed. But with a leaner and smarter operation, Secure Destruction survived.

MANAGE RECEIVABLES Two years ago, Paul Burns brought on Eric Edelson as a partner to help run Fireclay Tile, which is based in San Jose, Calif., and manufactures ceramic tile using recycled materials. Mr. Edelson, who had left a career as an investment banker in New York to get an M.B.A. at Stanford, knew the business had been struggling, but he was hopeful that he could help.

One number that looked impressive to him was the company’s accounts receivable balance, which was more than $100,000. That was money owed to Fireclay by its wholesale clients. “At first, I thought it was kind of neat since we could count on all that cash coming in,” Mr. Edelson said. “But after I started digging into it, I noticed a lot of stale accounts that were more than six months overdue.”

Mr. Edelson hired a third-party company to help Fireclay collect its receivables, but many of the companies had gone out of business. Sensing a lost cause, he changed tactics. After writing off most of the balance, he stopped sending new shipments to customers who had a balance due and started getting more upfront payments and staying on top of customers.

By making sure customers could not buy more tile until they paid for what they had already bought, Mr. Edelson gave his customers an incentive to pay up. That has helped cut Fireclay’s receivables balance to less than $30,000.

UNDERSTAND YOUR EXPENSES After he graduated from law school five years ago, Daniel Gershburg, then 24, decided to open a bankruptcy and real estate law practice in Brooklyn. “I literally didn’t know anything about accounting,” Mr. Gershburg said. The only number he paid attention to was the gross sales he was pulling in through retainers.

Article source: http://feeds.nytimes.com/click.phdo?i=d19dc4c5e178fab5a17bf01dfb88eb2e

Small-Business Guide: A Few Accounting Essentials Can Spell Survival

It is, for example, entirely possible for a company to be profitable but fail anyway because it does not have enough cash coming in to pay its bills.

“It’s like a racecar that goes too fast and runs out of gas,” said Doug Tatum, a serial entrepreneur who is a visiting professor of entrepreneurship at Middle Tennessee State University in Murfreesboro. Business owners do not necessarily need to know how to prepare a balance sheet, but they do have to know which gauges to watch.

One obvious step is to work with a bookkeeper or accountant, someone who can help navigate arcane accounting and tax rules and organize your affairs. But owners should understand that accounting is not just about paying taxes or reporting results.

“Small-business owners tend to hate accounting because it’s boring,” said Brian Hamilton, chief executive of Sageworks, a company in Raleigh, N.C., that tracks financial data for privately held businesses. “The mistake they make is not thinking about how they can use certain numbers as tools to better manage where their business is headed tomorrow.”

What follows is a guide to better understanding the numbers that drive a business. As the examples make clear, even smart people with advanced degrees can become confused by accounting issues. DON’T MISTAKE DEBT FOR PROFIT After earning a master’s degree in industrial engineering, Bart Justice figured he would get a job doing computer simulations or technical sales. Then in 2004, he learned about the paper-shredding industry, which was booming because of a rash of new security laws. Mr. Justice obtained a loan from a local bank to buy a mobile shredding truck, hired a truck driver and opened shop in Huntsville, Ala., as Secure Destruction Service.

The company hit $70,000 in sales its first year. Within four years, Secure Destruction had annual revenue of $500,000 and employed six people across two offices, one in Huntsville, the other in Birmingham, Ala.

To finance his growth — adding a shredding truck, for example — Mr. Justice kept borrowing money from the bank, not realizing that the more he grew, the more he needed to borrow because his revenue was not covering his expenses. The loans meant he had money in his accounts — but it was borrowed money.

“I knew how to print a financial statement from QuickBooks, but I couldn’t tell you what it meant,” he said.

It was not until early 2008 when he joined a peer group for Christian business owners called C12, that Mr. Justice was forced to confront the truth. “They would ask me questions about my numbers, and I didn’t know how to answer them,” he said. “They told me my business was going to fail unless I got a handle on paying down my debt.”

He hired an accountant and began analyzing how aspects of his business were performing, which led him to sell several pieces of equipment and to stop serving clients if he was losing money on them.

The advice proved timely. As the recession set in, the market for shredding collapsed. But with a leaner and smarter operation, Secure Destruction survived.

MANAGE RECEIVABLES Two years ago, Paul Burns brought on Eric Edelson as a partner to help run Fireclay Tile, which is based in San Jose, Calif., and manufactures ceramic tile using recycled materials. Mr. Edelson, who had left a career as an investment banker in New York to get an M.B.A. at Stanford, knew the business had been struggling, but he was hopeful that he could help.

One number that looked impressive to him was the company’s accounts receivable balance, which was more than $100,000. That was money owed to Fireclay by its wholesale clients. “At first, I thought it was kind of neat since we could count on all that cash coming in,” Mr. Edelson said. “But after I started digging into it, I noticed a lot of stale accounts that were more than six months overdue.”

Mr. Edelson hired a third-party company to help Fireclay collect its receivables, but many of the companies had gone out of business. Sensing a lost cause, he changed tactics. After writing off most of the balance, he stopped sending new shipments to customers who had a balance due and started getting more upfront payments and staying on top of customers.

By making sure customers could not buy more tile until they paid for what they had already bought, Mr. Edelson gave his customers an incentive to pay up. That has helped cut Fireclay’s receivables balance to less than $30,000.

UNDERSTAND YOUR EXPENSES After he graduated from law school five years ago, Daniel Gershburg, then 24, decided to open a bankruptcy and real estate law practice in Brooklyn. “I literally didn’t know anything about accounting,” Mr. Gershburg said. The only number he paid attention to was the gross sales he was pulling in through retainers.

Article source: http://feeds.nytimes.com/click.phdo?i=d19dc4c5e178fab5a17bf01dfb88eb2e

Small-Business Guide: Real-Life Lessons in the Delicate Art of Setting Prices

The fear, of course, is that raising prices will send customers fleeing. While that can happen, many small businesses have raised prices and lived to tell about it.

They echo a common sentiment: setting prices strategically is not just about the numbers. Buyers are not necessarily looking for the best price, said Mark Kronenberg, founder of Math 1-2-3, a New York-based tutoring and test preparation company.

“I learned it’s a misconception that if you raise prices too much, you’ll have no business,” Mr. Kronenberg said. “There are many customers who shop based on quality, not lowest price.”

Over the years, some prospective clients have balked at Mr. Kronenberg’s rates — his highest hourly rate is now $200 — but he said the company has more than made up for the losses by attracting and retaining higher-end clients who are more inclined to keep a tutor for a long time.

“I think it’s best to avoid a race to the bottom,” he said. “It’s an easy race to win, but you won’t have a lot of profit to show for it.”

This guide offers examples of small-business owners who decided to raise prices and the lessons they learned.

DON’T ASSUME PRICE IS ALL About three years ago a computer error caused all of the prices on Headsets.com to be displayed at cost rather than retail. With the lower prices on display for a weekend, Mike Faith, the chief executive, expected sales to soar. Instead, the increase was marginal. “It was a big lesson for us,” Mr. Faith said.

He realized that sales for his company, which is based in San Francisco, were far less dependent on price than on what he now says differentiates his business: customer service. “Every call we get is answered by a human being within four rings,” he said, “and our reps are well trained and know a lot about the headsets.”

Since the incident, Mr. Faith has raised prices once, by 8 percent and without much fanfare, although regular customers were told in advance. The result? Revenue rose about 8 percent as well.

“Over all, we didn’t notice any change in sales revenues, but all our sales were of the higher margin,” he said. “Did some customers not like the price? Yes, I’m sure. But that’s the case with any price you charge — there’s always somebody cheaper. The truth about pricing is it’s an art with a little bit of science, rather than a science with a little bit of art.”

Melanie Downey, the owner of Wilava, which manufactures and sells natural skin care products, also assumed that her customers were motivated primarily by price. Over time, she realized she had set prices too low to sustain the business. Yet she hesitated to raise them because she wanted her products to be affordable for those who needed them, and many of her customers have cancer or severe skin problems, including children with eczema. Concerned about maintaining trust, she decided not to act until after the company’s spring busy season.

The increase will range from 4 percent to 20 percent across Wilava’s line. Ms. Downey has been alerting customers in person and has gotten positive, even encouraging, feedback. In the next few weeks she will begin telling online customers. “I’m nervous about that,” she said, “since I won’t get immediate feedback.”

Still, looking back at the last year, she said, “I wish I had done this months ago.”

RIVALS’ PRICES MAY NOT MATTER A lot of small-business owners set prices just by looking at what their competitors charge. Naomi Poe, founder of Better Batter Gluten Free Flour near Altoona, Pa., learned that it is important to try to understand how your customers value your product.

In the food industry, Ms. Poe said, customers generally look for the cheapest price, but because her flour and baking mixes contain no gluten, they cost more to manufacture. She initially tried to compete with products that contain gluten on price but lost money on every sale.

Article source: http://feeds.nytimes.com/click.phdo?i=6627d718f160ca48ac7c8f1c9e88c822