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The Small Business Advisor Newsletter for July, 1998

NOTES/TIPS/etc

IRS WEBSITE. The IRS has a new website (http://www.irs.gov) and it is quite good. Most forms and publications are available for instant download and many of the publications are on-line which is quite useful for quick research. There is a lot of handy and useful information here - check it out.

MARKETING. The Internet is a powerful marketing tool. Try these folks for sending your news releases electronically:

http://www.newsbureau.com/
http://www.internetwire.com/
http://www.newstarget.com/
http://www.xpresspress.com/
http://www.urlwire.com/

COMPARE SHIPPING RATES on www.smartship.com. Very useful resource. In addition you can also track packages that have been sent via FedEx, UPS, Airbourne, or Express Mail.

FREE e-MAIL. Try Yahoo for a free e-mail account. (http://www.yahoo.com). Sign up is quick and easy and the e-mail interface is excellent.

LONG DISTANCE. Don't forget to call your long distance carrier and see if any improvement in your rate is possible. Say you have been looking around and am thinking of switching! I just did this (again!) with my service (NOS) and reduced my rate by FOUR cents/minurte! Call your vendor NOW!

MERCHANT ACCOUNTS. One of the most often asked questions is where to get a merchant account (for internet/telephone based businesses). I don't have all the details but here is a VERY good possibility to check out. Costco has a program that is available to their "Executive Membership," which cost $100/year. Anyone can be a member. Members have access to a merchant program (Visa,MC, AmEx) at a discount rate of 1.89% plus 25-cent transaction fee, These are EXCELLENT rates. Furthermore, only $25 application fee and NO other periodic charges. Lastly, if you have software (like icVerify) you may use it with this program. We're going to switch! This is a great bargin. Check it out. Call Costco at 1 (800) 220 6000. Remember, read about it here first!

A PERSONAL REFERRAL

We just received a note from a friend we have been involved with for the last year. His name is Corey Rudl and he has many very successful online businesses. In fact, one of his most popular successes is the book "Car Secrets Revealed"... with his unique promotional techniques online, he has made it the #1 best selling car book on the internet... all within a few months! He specialized in very unique and powerful internet marketing ideas and techniques.

If you are considering starting a business on the internet or already own one, you want to view his web site... Corey really knows what he is talking about. He has made a fortune online and he has just developed a new website that REVEALS all his tips, tricks and techniques for starting a business on the internet and making a fortune.

He discusses everything you would ever want to know about starting a business online... or if you already have a business online, he reveals exactly how to promote it for maximum success.

His website is: http://www.marketingtips.com/t.cgi/7115 Check it out, there is lots of information and tips. You will be very impressed.

FINANCING YOUR NEW BUSINESS
by Robert Sullivan

If it is at all possible, you should start your business without any funding beyond your own. Do this by starting slowly and in conjunction with present employment. Start your business by working evenings and weekends while keeping your present job as long as practicable. This way, if the business does not meet your expectations, you have not incurred debt and will still have a job!

However, in many instances outside funding will be required depending on the nature of the business. For example, expensive equipment or initial stock may be required. When determining your financing needs, remember that nearly everyone underestimates what is required so be careful and do your planning accordingly. And of course, don't forget to factor in contingency ...sickness, bad weather, equipment breakdown, etc. Anything that increases the time line to profits! Best you figure on a year before you see a profit. Here are some things to keep in mind when preparing your startup budget:

Office equipment (Fax machine, computer, printers)
Production equipment (if you will be manufacturing)
Office or production furniture
Office supplies
Legal and CPA fees
Insurance
Business licenses or permits
Lease deposits
Remodeling costs
Utility deposits (this can be quite large!)
Salaries
Shipping
Advertising and promotion
and the big one ... contingency!

What you want to avoid is having to find additional financing during your startup phase. It is easier to obtain financing the first time around!

There are two major forms of business financing.

* DEBT FINANCING. This simply means you get a loan from someone or somewhere and go into debt! You are obligated to repay the money.

* EQUITY FINANCING. This involves "selling" a portion of your company to an outside investor. You have no obligation to repay the funds. In general, this type of funding is provided by venture capital firms.

The fact is, 99.99% of all small businesses will utilize debt financing since most "equity lenders" (venture capital companies) are interested in lending large amounts of money, generally a million dollars or more. We will only consider sources for obtaining debt financing for your venture.

For those of you interested in equity financing (venture capital), here are some suggestions for locating possible sources:

Check the yellow pages under "venture capital companies."

Check out http://www.vcworld.com, Venture Capital World Online. They provide a direct database link between investors searching for opportunities and entrepreneurs in need of venture capital.

Check with the National Venture Capital Association in Arlington, VA at 703 528 4370.

SOURCES FOR DEBT FINANCING

1. YOURSELF! (Savings) You are your own best "lender" if you have the savings. This approach can be quick and easy.

CAUTION: ensure you have adequate savings for both the business and other life contingencies.

2. FRIENDS and RELATIVES. If they believe in you and your idea, friends and relatives are sometime willing to fund you. Choose this route with care and ensure you execute a formal loan document stating loan terms (interest, terms of repayment).

CAUTION: Many friends have been lost and many relatives alienated because of a small business failure.

3. BANKS and CREDIT UNIONS. Many banks and credit unions (check with your own first and with you local chamber of commerce for alternate possibilities) will loan money for starting a small business. This approach will require that you present a formal plan to the bank showing justification for the amount you are borrowing.

4. THE SMALL BUSINESS ADMINISTRATION (SBA). Check out their website (http://www.sba.gov). Contrary to what many believe the SBA does NOT generally loan money directly but rather guarantees a loan (normally up to 90%). This can make it a lot easier to obtain a bank loan since the banks risk is lowered considerably. The exception is that the SBA does provide direct loans to certain groups including Vietnam-era and disabled veterans and handicapped individuals. In general, the SBA will not offer any assistance until you have been turned down for a loan by a commercial bank.

Most loans guaranteed through the SBA are between $25,000 and $750,000. However, there is a "microloan" program for amounts from a few hundred dollars up to $25,000.

5. VENDOR FINANCING. If your business is one that relies heavily on certain vendors, it may be possible to obtain financing through the vendor. After all, they want you to use their product and therefore have an interest in helping you be successful.

6. STATE. Some states have small business financing authorities that issue tax-exempt development bonds that be used to finance land, buildings and equipment for manufacturing businesses. Check with your local government office for details.

7. HOME EQUITY LOAN. Interest rates for this kind of loan are generally quite low and the interest is fully deductible for the first $100,000 borrowed.

CAUTION: You are placing your home on the line!

8. LIFE INSURANCE. Some type of life insurance policies (whole life and universal) have cash value which can be borrowed at very low interest rates. You are not obligated to pay this money back but if you don't, your policy payout is reduced by the amount borrowed.

9. RETIREMENT PLANS. Some retirement plans (401K for example) allow you to borrow against vested benefits. Generally, up to 50% may be borrowed as long as this is less than $50,000.

CAUTION: If you quit you employment, the loan must be repaid immediately. If you don't the amount borrowed is treated as an early distribution and is taxable.

10. GRANTS. Many foundations provide funding in the form of grants. Check "The Foundation Directory" at your local library or visit their website at http://fdncenter.org to find out what foundations may have an interest in your specific business idea. The Foundation Center may be reached at 212 620 4230.

11. CREDIT CARDS. These should be used with care because of the excessively high rates of interest usually charged.

A FINAL NOTE. Remember that many of these loan ideas will require you to sign a personal guarantee. This means that regardless of what happens to your business, you are personally liable for the repayment of the loan amount. Think carefully before signing.

Fifteen Tips for Home Office Success
by Jeffery D. Zbar

* Get psyched. In the beginning of a home-based business venture, it's easy to get dogged by perplexing questions like "what if..." and "am I nuts?". Instead, many solo flyers forget the questions of sanity and focus on "what if" from a positive perspective. "What if" I succeed, outpace projections, need to move into a larger space? This was a promotion from employee to entrepreneur, and entrepreneurs are positive thinkers. Once the honeymoon is over, take it to the next level. A mantra to live by: B-E A-G-G-R-E-S-S-I-V-E! Passivity is OK if you're Swiss and there's a war. But not in business. Be competitive, agile, sharp and unswayed by the initial slights and jabs that might come from peers, family and friends. They're just jealous and don't understand the plan. Once you're successful, they'll get the picture -- and admire you for it.

* Avoid chaos. Where's the nerve center of your business going to be? Hopefully, not where the nerve center of the household is. The best home offices operate from behind doors that close. That way, you can drown out the sounds of family, dogs, doorbells, televisions, stereos and the assorted din of household life without miffing the family. Even if you live alone, an office set up in a spare room provides the quiet time solo that flyers come to appreciate. Closed doors also hide mid-week's messy office, when the desire or rationale to clean it up just doesn't exist.

* Create a transition. When you commuted, the time in the car or on the train was your transition from home to office. But the home office has no such passage to speak of. By creating a dedicated office, home-based workers are able to walk across a real threshold and create a mental and physical transition from home to place of work. They can close the door and immerse themselves in the structure and solitude of the office and become more in tune with the office mindset.

* Look sharp. Create attractive, colorful stationary -- especially business cards and Rolodex cards with your name or subject on the tab. And spread them freely! Marketing will be essential to your new venture, and your stationary is your calling card.

* Determine and capitalize on your biological-home office prime time. When are your best times to work on the computer, make telephone calls, or be creative? Do you need to spend this Wednesday calling clients and sources around the country? Should Thursday evening be spent working on the computer with some soft music playing in the background? Some people who have limited client contact (on either a daily basis, or project-by-project) work best with an eclectic schedule. They may, for example, work from dawn 'til noon, break for a few hours, and return later in the afternoon to work in solitude and silence as the phone quiets and the brain hums along. Office hours can be as pliable as words yet to be put to an blank page. Make of them what you need them to be.

* Lay down the law. Possibly the hardest facet of working from home is getting the family and friends to understand that this isn't "that little thing you do from home." This new venture ultimately will put bread on the family table, clothes on the kids' backs, and cash in the pocket for life's little extras. Indoctrinate family and friends about the rules of this new work arrangement -- when the office is off limits, when not to bug daddy or mommy, when not to call for some impromptu afternoon plans.

Become a flexible enforcer who's willing to cut loose when the schedule's light and you could use a break.

* Enlist help from your mate, partner or significant other. They have a vested interest in your success. Enlist his or her understanding of and support for your enterprise. Do they have skills (bookkeeping, invoicing, filing or record-keeping) they can contribute to help you do what you do? If not, teach them to handle certain rote chores. This way, they'll shoulder some of the burdens of home office management, while removing them from your schedule. And they might even qualify for a paycheck and some company benefits.

* Be transparent. Use communications technology and the right mental strategy to maintain "transparency," or the appearance of being professional and not necessarily working from a home office. Consider whether a poor mental impression from an aging answering machine with a faded outgoing message would hurt your clients' perceptions of you as a vendor. If done right, the home office can appear like any downtown tower -- or at least not like a home office.

* Plaster your name and info on everything that leaves the office. Every invoice, press release, brochure or other correspondence that leaves the office MUST have all of your contact data on it. Your name, address, phone, fax and electronic mail address or Web site also should be on every leave-behind you create -- including stationary, brochures, samples, even on your voice mail message.

* Valuate your time. Working solo is a matter of managing and maximizing your time, prioritizing your tasks, and outsourcing when workloads peak. Delegating responsibility is one of the most difficult tasks for an entrepreneur, because most think they're the best at what they do. Get over it! You may be right, but does packaging goods, addressing envelopes, filling out invoices or some other mindless chore demand perfection? Besides, what do you value or charge your hour at? Do you think having a temp or a family member handle a rote chore costs less? You betcha!

* Don't ignore the law. Whether it's the law or zoning and how they affect the home- based business, ignorance of the law is no excuse. Many cities restrict or ban home- based businesses, signage, client visits or on-site, non-resident employees. Learn what's allowed in your municipality, then make your decision. Many home-based workers are "guerrilla" entrepreneurs, working without permits and hiding in the shadows for fear that their city will deny their application or shut them down. Don't lurk in guilt; Lobby for change.

* Become tax savvy. From the home office itself to everything that gets used in the daily course of affairs, learn how to use tax code to your advantage. Stay keen on current tax law. Don't rely solely on your accountant or other tax professional for advice. Read the tax code, formulate some ideas of what you'd like to achieve, be an informed and knowledgeable tax citizen.

* Become a SOHO evangelist. Many in the corporate community still are inexperienced and downright resentful when it comes to the small office/home office trend. Help introduce them to the benefits of working with those who work from home. Tell them of the cost savings they'll experience from your decreased overhead (no more real estate and desk space, benefits, taxes and other incidentals). Convince them that you -- and those like you -- are more productive because you're more satisfied workers who can be depended upon to complete their projects.

* Don't become a workaholic. Did your corporate boss ever tell you not to overwork? In the home office, it's a very real problem. Not only does overworking consume one's private life, it can stifle all the other things that would otherwise promote a healthy mind and body -- like eating well and exercising regularly. Realize it can take over your life -- before it happens. Set limits on your workday, except maybe in times of a deadline crunch. Then adhere to them.

Enjoy the ride. The whole idea behind working from home in the first place is being your own boss, setting your own rules -- and having the power to bend them when the spirit moves you. Is the home-town team playing this afternoon? If you can afford the time, take in a game at the ballpark. The youngster has a recital? What's more important in the grand scheme of things? After all, you can always burn some midnight oil to meet that deadline. Your child won't remember the time you spent on the phone or computer. But as the kids grow older, they will come to appreciate the quality hours you spent with them. This ride called life only comes around once. Enjoy the ride. ###

Copyright (c) 1998 Jeffery D. Zbar. All rights reserved. Excerpted from his new book, "Home Office Know-How," Upstart Publishing. $12.95. Available at bookstores or www.goinsoho.com.