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You’re the Boss: A Year’s Worth of Wisdom From the Trenches of Small Business

December 29, 2011 by Leave a Comment

Here at You’re the Boss, we believe that most small-business owners are really good at a few things, the things that allowed them to get their businesses off the ground. Inevitably, however, most owners are unprepared for the dozens of other tasks that are essential to running a business. We hope to help with those. But we don’t try to make it look easy.

Success rarely comes in a straight line from point A to point B. So we don’t emphasize the stories of rock star entrepreneurs who never seem to struggle; instead, we emphasize the struggle. Our bloggers try to show what life is like in their trenches, the ups and the downs, what’s working and what isn’t, the lessons learned. Along the way, they often benefit from the feedback of some of the smartest small-business readers around.

Here are highlights from a year in the You’re the Boss trenches:

Jay Goltz wrote about why there are more and more resources for small businesses — but failure rates still remain high. And the top 10 reasons small businesses fail. And the dirty, little secret of successful companies (they fire people). And why it can be a mistake to dismiss annoying customers (for one thing, “crazy” customers can have sane friends). And whether Groupon is ruining retailing. And what it takes to collect receivables, especially in a difficult economy. And why checking references isn’t a waste of time (especially if you know what to ask). And how to tell if you’re a good boss. And a surprise e-mail he got from an employee he’d tried to forget. And why if you can take a vacation, you should take a vacation.

Paul Downs wrote about how hard it can be to accept advice. And the surprising results when he experimented by turning off his Google Adwords campaign for a week. And the meaning of his falling health insurance rates. And his long-term struggle with pricing. And dealing with an extremely picky customer. And the reader comment that changed his business. And, best of all, how his business finally turned a profit.

MP Mueller wrote about coming to terms with being a boss. And using God as a marketing strategy. And figuring out that she’s not getting as much out of her accountant as she probably should. And two businesses that really understand social media. And how telling your story can help you connect with customers.

Barbara Taylor wrote about business owners who can’t bear to hear the truth about what their businesses are worth. And the four questions to ask before hiring a business broker. And how words can get in the way of selling a business. And realizing that you know you have to change as a business owner. And whether the term lifestyle business is an insult. And whether there is any way the iconic owner of an iconic business in Atlanta can sell her business.

Bruce Buschel wrote about the five things he wishes he had known before the fire. And what it took to reopen the restaurant after the fire. And how his customers say the darnedest things. And the events of an especially bad night in August. And the hardest part of running a restaurant. And how to defend against an unhappy customer who is trashing your business all over the Internet.

Gabriel Shaoolian wrote about why mediocre Web sites are so dangerous. And whether a small retailer can compete with the big boys and what’s wrong with this retailer’s site.

Tom Szaky wrote about choosing between profits and growth. And about trying to create a policy to cover romance in the office. And his top 10 sales tips. And whether green companies should partner with mega companies like Wal-Mart. And how a small company can go global.

Robb Mandebaum wrote a case study about a retailer who couldn’t get a loan. He also wrote about whether small businesses are over-taxed and over-regulated. And whether the health care overhaul will encourage businesses to drop health coverage. And how small-business owners responded to President Obama’s jobs plan. And how some small businesses have thrived without borrowing money. And he answered questions about Small Business Administration lending on C-Span.

David Freedman wrote about whether it pays to move to the cloud. And a company that has automated the process of starting a business. And a more efficient approach to hiring. And a tool to help businesses struggling with social media. And why, if you have a great idea, you should tell everyone.

Adriana Gardella created a business group of women business owners who meet regularly to discuss how they’re doing. She wrote about the struggles of one of those owners to overcome some bad decisions made early in her career, before she understood the dangers of growth. And how two of those owners think their fathers would react if they could see how the company they started is being run today. And the dark side of opening a store. And why women have an advantage in technology. And how a Rwandan entrepreneur lost her husband to genocide and then found her way into the funeral-home business.

Jessica Bruder wrote wrote a case study of whether it makes sense for a failing business to spend $170,000 for a consultant (in this case it did). And about a start-up incubator that floats. And a start-up that wants to eliminate “food deserts.” And starting the “Netflix of flowers.”

And every week, Gene Marks scours the Web so that you don’t have to — looking for all of the stories that have the biggest impact on small-business owners. On Tuesday, he selected the best of those stories.

Happy Holidays from the You’re the Boss team!

Article source: http://feeds.nytimes.com/click.phdo?i=0c3ebe875589f451622992599e38a453

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You’re the Boss Blog: Do You Know a Small Business That Failed This Year?

December 29, 2011 by Leave a Comment

Today’s Question

What small-business owners think.

Even in good times, the survival rate for small businesses is discouraging — about half fail within five years, according to the Small Business Administration. Unfortunately, 2011 was another tough year. We’ve just published an article by Eileen Zimmerman about five businesses that didn’t make it. Behind every failed business, there’s a story.

Do you know of a small business that didn’t survive 2011? If so, please tell us below what the business did, why it mattered to you, and why you think it failed.

Article source: http://feeds.nytimes.com/click.phdo?i=489549f9549a1c2131b53ebcc2f7a123

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Five Businesses That Did Not Survive 2011

December 29, 2011 by Leave a Comment

Inevitably there are businesses, like the Elizabeth Anne Bed Breakfast in Crested Butte, Colo., that struggled. And inevitably, there are owners, like Kevin and Denise Reinert of Elizabeth Anne, who held on as long as they could. “We kept thinking we could turn it around,” Ms. Reinert said. “We rented out rooms until the day we moved out.”

Here are the stories of five small businesses that were not able to survive 2011.

A Poorly Timed Refinancing

The Elizabeth Anne Bed Breakfast was bought in 2003 for $650,000 and closed last August.

AT ITS PEAK After buying the Elizabeth Anne, the Reinerts steadily increased revenue, from $78,000 in 2004 to $104,000 in 2007. “We got to know the guests,” Mr. Reinert said, “and they got to know each other.”

WHAT WENT WRONG In 2007, the couple refinanced, taking out some equity to renovate the kitchen. They wound up with a 10-year, interest-only loan that increased their mortgage payment by $1,700 a month. But with people taking fewer vacations, Mr. Reinert said, revenue declined 21 percent in 2009. In 2010, they fell behind on their mortgage payments and were not able to modify the loan. The bank foreclosed in June.

LOOKING BACK Ms. Reinert blames the refinancing: “It’s what did us in. Back then, we didn’t anticipate things slowing down.” Today, the Reinerts run KR Construction, which does handyman jobs. Ms. Reinert also works at a local restaurant, and Mr. Reinert plays bass in a Beatles tribute band, Dr. Robert.

‘We Did Everything Right’

Just Moulding, based in Gaithersburg, Md., sold and installed decorative molding. It opened in 2004 and closed last April.

AT ITS PEAK Mark Rubin and Kevin Wales started with a single workshop that handled small jobs larger installers did not want. In 2007 things were going so well they decided to sell franchises in the business and raised $700,000 from 21 investors. After Mr. Wales left the company in 2010, Mr. Rubin’s father-in-law, Richard Hayman, took over as president. Soon after, sales increased by 20 percent and the company became profitable.

WHAT WENT WRONG The recession. The company, Mr. Hayman said, sold a product that people wanted but did not need: “It was crown molding, not a furnace or a roof.” And while the business had the high legal and accounting costs associated with selling franchises, it had sold only three by the end of 2009. Potential franchisees had trouble raising the $100,000 to $250,000 needed to get started.

LOOKING BACK “We did everything right,” said Mr. Hayman, who sank $470,000 into the company. “We hired the best people and had a great product. We could not overcome the bad economy.” He and Mr. Rubin declined to discuss what they are doing now.

When 1% Is a Lot of Money

P H Capital, a commercial mortgage company in Brooklyn that specialized in finding loans for small businesses, opened in 2009 and closed last March.

AT ITS PEAK Shawn Porat and Ismail Humet started P H Capital with $4,000 while Mr. Humet was working as a Wall Street analyst and Mr. Porat was running Recovery of Judgment, which helps clients collect legal judgments. The friends saw the subprime crisis and tightening of credit as an opportunity, believing they could match small businesses with lenders offering alternative financing. In January 2010, Mr. Humet and Mr. Porat were piecing together a $500 million deal that they believed had a good chance of working. “Our commission was 1 percent,” Mr. Humet said, “and 1 percent of $500 million is a lot of money.”

WHAT WENT WRONG For one thing, the big deal fell apart. Lenders were skittish because the money would be used to build a factory in Asia, Mr. Humet said, and they were wary of dealing with a foreign government. In addition, lenders wound up imposing stricter parameters for alternative loans. He also said that P H clients often had unrealistic expectations about how much money they could get. “We had a restaurant owner that needed $300,000 to open another location, but we could only get him $150,000,” Mr. Humet said. “He didn’t go through with it.”

LOOKING BACK Mr. Humet said he and Mr. Porat did not anticipate how difficult it would be to place even their best applicant’s loans. Since closing P H, Mr. Humet has helped start MyFreebeez.com, which promotes small businesses online using free giveaways. Mr. Porat operates Recovery of Judgment and Judgment Marketplace, an online marketplace where monetary judgments can be bought, sold and traded.

Poor Cost Projections

ScooterFood, a maker of all-natural dog food based in Brooklyn, opened in 2006 and closed last August.

Article source: http://feeds.nytimes.com/click.phdo?i=99c3729d8b0b50ca66a8feb8f53ff015

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China’s Businesses Find Loans Are Harder to Get

November 8, 2011 by Leave a Comment

The demand was there last spring, he said on a recent afternoon. But his bankers weren’t. They balked at lending him money to buy equipment — and today his export-oriented business is about where it was six months ago.

“I feel like I’m walking in place,” he said.

He has lots of company. While many businesses in the United States struggle to stay afloat and workers collect unemployment checks, China has the opposite problem: an economy, pumped up by expansive lending by state-controlled banks, which is growing too fast to keep inflation and speculation in check.

Beijing’s solution: Create an artificial shortage of credit. The central government has set stringent though undisclosed limits on how much money each bank can lend, clamped down on real estate speculation by limiting the number of mortgages allowed for each citizen and begun cracking down on many forms of semilegal and illegal lending. After months of steady tightening, the controls have finally begun to bite into inflation, business growth, real estate prices and lending.

Lending by Chinese banks jumped 32.5 percent in 2009 in inflation-adjusted terms. That growth slowed to 13.3 percent in 2010 and 7.3 percent in the first nine months of this year. Lending to small businesses has grown slightly faster. But there are so many small businesses and they are expanding so quickly that competition for these loans is especially fierce and difficult, said Nicholas R. Lardy, an economist at the Peter G. Peterson Institute for International Economics in Washington.

The policy makers’ principal goal is to tamp down inflation, which has played a repeated role in causing social unrest, including during the 1989 Tiananmen Square protests. Despite a goal of limiting inflation to no more than 4 percent a year, prices have stubbornly remained about 6 percent higher this autumn than a year ago for consumers based on official gauges — and up to twice that by the estimate of many private economists.

The worst of the credit squeeze this year has compelled at least a few business people to flee the country or even commit suicide. They did so after borrowing money at usurious rates of up to 5 percent a month — an 80 percent annual rate — from loan sharks or neighborhood lending pools and then finding that their speculative investments with the money did not pay off.

But the credit squeeze is far broader. In more than a dozen recent interviews at the Canton Fair here, the country’s largest export trade fair, every business owner or sales manager described increasing difficulties in borrowing money — as well as strategies that banks and borrowers alike are using to cushion the effect of the new lending restrictions.

Some banks are requiring lenders to personally guarantee corporate loans and put up considerably more land and factory equipment as collateral. Others lend money only if borrowers agree to redeposit up to half of the loan in the same bank at a much lower interest rate. The practical effect is that the borrower pays a much higher interest rate than the official, heavily regulated interest rate for loans, usually 7 or 8 percent.

“If the bank lends you one million, they ask for 500,000 back as a deposit,” said Elaine Yan, the import and export manager at the Wuxi Zontai International Corporation, a trading company specializing in brightly colored shower curtains and bath mats. The company has decided not to borrow money at all, meeting its modest financing needs through retained profits.

Daunted by such terms, Helen Huang, the owner of a company producing chrome-plated paperweights, turned to a neighborhood lending pool last year. The $3.1 million she borrowed helped finance a $7.9 million land purchase so her company, the Shijiazhuang Harmony Import and Export Company, could build a factory.

Keith Bradsher reported from Guangzhou and Michael Wines from Beijing.

Article source: http://feeds.nytimes.com/click.phdo?i=8ddb106d5432a93ce41bba81fe0b8edb

Filed Under: Business News Tagged With: , ,

The Agenda: More Lending, but Not to Small Businesses

August 24, 2011 by Leave a Comment

The Agenda

How small-business issues are shaping politics and policy.

The Federal Deposit Insurance Corporation reported a modest bit of good news from the banking world on Tuesday.

In the second quarter of the year, bank failures were down, troubled banks were fewer and bank profits were up. And the F.D.I.C. said that “loan portfolios grew for the first time in three years.” According to the agency’s release, the bulk of the lending growth came in commercial and industrial loans as well as loans between banks.

Ah, business lending, then, is back! Well, not so fast. Yes, top-line commercial lending is up, but a closer look shows one segment of loans that did not increase: those to small businesses. According to the F.D.I.C., while the nation’s total commercial and industrial loan portfolio grew by $34 billion, or almost 3 percent, total outstanding loans to small businesses actually fell by $2.5 billion, or 0.4 percent.

Small-business loans are defined as those of $1 million or less, but exclude agricultural loans and loans secured by farmland. As of the end of June, the total commercial and industrial loan portfolio amounted to $1.2 trillion. Small-business loans made up almost exactly half of that, or $607 billion.

Article source: http://feeds.nytimes.com/click.phdo?i=c52812d5ca8ef699d695f4d3ced5d311

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The Boss: Farming to Franchising

June 4, 2011 by Leave a Comment

I demonstrated management skills early. At 13, I got a job detasseling corn on another farm. The next year, I became a team leader over six other teenagers, and at 15 I was appointed supervisor of a group of 40 other students.

My dream was always to go to the University of Michigan and become a mental health therapist. I started at Central Michigan University, then transferred to the University of Michigan for my last two years and graduated with honors in 1992.

I started at Molly Maid that year as a receptionist. I told Karen McKinnon, who was married to one of the company owners, that I planned to return to school to get a master’s degree in social work. She was working at the company and asked me to commit to staying a year. I agreed. When it came time for me to leave, she and her husband said they’d help with tuition if I stayed on and attended night school. I agreed, which let me avoid taking out loans.

In one of my night classes, I saw a documentary about addiction that brought tears to my eyes. I went home and prayed for the people in the film. I realized that I was internalizing other people’s problems and that it might be hard for me to be a therapist. I had seen how small businesses could benefit people, so I thought I might be able to help others by working for a franchisor.

In 2000, David McKinnon and his partners started Service Brands International as the umbrella company for Molly Maid and other franchising companies. Over the years, I rose to senior director and then vice president for operations at Molly Maid. Then I became president and chief operating officer of 1-800-DryClean, a sister company of Molly Maid. In 2006, I became Molly Maid’s president.

Before my latest promotion, I was worrying about whether I was ready for this position at such a young age. Todd Recknagel, president and C.E.O. of Mr. Handyman International, another sister company, pulled me aside and told me a Bible story about Esther. She risked death by approaching her husband, King Xerxes, without being summoned, in an effort to save her people from being killed. Todd spoke about her courage and toughness and said my experience had prepared me for the role.

Some people say our industry does not pay its workers well. Molly Maid team leaders can make up to $13 an hour, and our employees who are mothers are able to be home for their children in the mornings and afternoons. Many employees stay for years.

We have more than 400 franchises in the United States and almost 300 in other parts of the world. People who have been downsized in other work seem to like owning franchises. Nine years ago, my husband, Todd Mailloux, was a supervisor for a manufacturing company related to the auto industry. He wasn’t downsized, but he left and bought a Mr. Handyman franchise. (He would have been laid off from the manufacturing company, however, because it ended up closing.) Todd has flexibility in his schedule and helps with our children when I’m traveling on business.

Molly Maid has chosen an end to domestic violence as our cause. Two years ago, I was at an employee’s20-year anniversary celebration when another employee pulled me aside to say how much she appreciated our efforts. She had been a victim of domestic violence herself and liked to take part in our annual drive to raise money for shelters.

As told to Patricia R. Olsen.

Article source: http://feeds.nytimes.com/click.phdo?i=39c46bbfc1fd73b80c545cc6ca628814

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Economic Memo: Employment Data May Be the Key to the President’s Job

June 2, 2011 by Leave a Comment

Seventeen months before the next election, it is increasingly clear that President Obama must defy that trend to keep his job.

Roughly 9 percent of Americans who want to go to work cannot find an employer. Companies are firing fewer people, but hiring remains anemic. And the vast majority of economic forecasters, including the president’s own advisers, predict only modest progress by November 2012.

The latest job numbers, due Friday, are expected to provide new cause for concern. Other indicators suggest the pace of growth is flagging. Weak manufacturing data, a gloomy reading on jobs in advance of Friday’s report and a drop in auto sales led the markets to their worst close since August.

But the grim reality of widespread unemployment is drawing little response from Washington. The Federal Reserve says it is all but tapped out. There is even less reason to expect Congressional action. Both Democrats and Republicans see clear steps to create jobs, but they are trying to walk in opposite directions and are making little progress.

Republicans have set the terms of debate by pressing for large cuts in federal spending, which they say will encourage private investment. Democrats have found themselves battling to minimize and postpone such cuts, which they fear will cause new job losses.

House Republicans told the president that they would not support new spending to spur growth during a meeting at the White House on Wednesday.

“The discussion really focused on the philosophical difference on whether Washington should continue to pump money into the economy or should we provide an incentive for entrepreneurs and small businesses to grow,” said Eric Cantor, the majority leader. “The president talked about a need for us to continue to quote-unquote invest from Washington’s standpoint, and for a lot of us that’s code for more Washington spending, something that we can’t afford right now.”

The White House, its possibilities constrained by the gridlock, has offered no new grand plans. After agreeing to extend the Bush-era tax cuts and reducing the payroll tax last December, the administration has focused on smaller ideas, like streamlining corporate taxation and increasing American exports to Asia and Latin America.

“It’s a very tough predicament,” said Jared Bernstein, who until April was economic policy adviser to Vice President Joseph R. Biden Jr. “Is there any political appetite for something that would resemble another large Keynesian stimulus? Obviously no. You can say that’s what we should do and you’d probably be right, but that’s pretty academic.”

More than 13.7 million Americans were unable to find work in April; most had been seeking jobs for months. Millions more have stopped trying. Their inability to earn money is a personal catastrophe; studies show that the chance of finding new work slips away with time. It is also a strain on their families, charities and public support programs.

The Federal Reserve, the nation’s central bank, has the means and the mandate to reduce unemployment by pumping money into the economy.

As financial markets nearly collapsed in 2008, the Fed unleashed a series of unprecedented programs, first to arrest the crisis and then to promote recovery, investing more than $2 trillion. The final installment, a $600 billion bond-buying program, ends in June.

Now, however, the leaders of the central bank say they are reluctant to do more. The Fed’s chairman, Ben S. Bernanke, said in April that more money might not increase growth, but there was a growing risk that it would accelerate inflation.

Congress charged the Fed in 1978 with minimizing unemployment and inflation. Those goals, however, are often in conflict, and the Fed has made clear that inflation is its priority. Fed officials argue in part that maintaining slow, steady inflation forms a basis for enduring economic expansion.

Eric S. Rosengren, president of the Federal Reserve Bank of Boston, said in a recent interview that the Fed had reached the limits of responsible policy.

Article source: http://feeds.nytimes.com/click.phdo?i=012e21cf280e5897041c58b195707321

Filed Under: Economy News Tagged With: , ,
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