As the 2011 tax season gets underway, many small business owners will be seeking the assistance of professional tax preparers to help them through the process. But in an effort to save money, they may end up shortchanging themselves. Here are three reasons why a long-term financial adviser may more adequately fulfill the needs of your small business as opposed to a tax preparer:
Lack of familiarity with your industry or your location. Many qualified tax preparers may be limited in their knowledge of various industries as well as the legal requirements across state lines. Many qualified accountants, CPA’s and tax attorneys on the other hand are more likely to have this knowledge and to have worked with a wide range of clients.
Limited, long-term financial advice. Those business owners who solely opt for a tax preparer miss out on all the financial advise that an experienced accountant, CPA, or tax attorney can offer.
Less commitment. While choosing to use the services of a qualified tax preparer may help you come tax time, there is no relationship beyond that. By using a financial adviser year round, that person will be more involved in your business and is thus more likely to be committed to helping your business out.
In short, while using the service of a professional tax preparer can help take the off burden of filing your business’ tax return, by choosing a more long-term arrangement with a qualified financial adviser you’ll end up getting so much more.
When it comes to business marketing, everything rides on company’s brand- it’s unique identity based on words, imagery, emotion, and reputation. It is through the brand that a customer gets to know a particular product or service, and as such, it is one of a company’s biggest intangible assets. But as the following collection of rebranding failures attests, many bigger corporations seem to be of touch both with the power and dynamics that lie behind their corporate brands as well as the customers it caters to.
New Coke
In an apparent attempt to appeal to younger consumers, Coca-Cola rebranded it’s flagship softdrink with the introduction of New Coke in 1985. Consumer backlash soon followed, with some people even trying to buy the old product from overseas markets where the new formula had not yet reached. Several months after debuting New Coke, Coca-Cola retreated, bringing back the original formula under the moniker, Coca-Cola Classic.
Accenture
Shortly after it broke away from its namesake, accounting firm Arthur Andersen, Andersen Consulting was in need of a new brand name. They held a company-wide competition and evetually settling on the name Accenture, a combination of the phrase “accent on the future.” When the new title was officially introduced in January 2001, critics derided it as generic, nonsensical, and meaningless, and it was regarded as one of the worst corporate rebranding attempts of all time. But the timing proved to be fortuitous, however, after the Enron scandal broke out in October of that same year permanently damaging the image of its accounting firm, Arthur Andersen.
Altria Group
When your products are known to cause adverse health effects leading to premature death, it makes sense that you’d want to change your brand name. In January 2003, Philip Morris Co. Inc., the world’s largest cigarette maker known for brands such as Marlboro and Virginia Slims, changed its name to the Altria Group. But instead of creating distance, the name change generated tremendous backlash among consumers who saw the move as yet another attempt of the tobacco company to sidestep responsibility for the harm that its products cause.
“Our friends call us The Shack” That’s the byline that accompanies Radio Shack’s attempt to reposition itself as a cool cat in the consumer electronics industry. The ad campaign started inAugust 2009 which featured several short, rather quirky videos was ridiculed by consumers and marketing experts alike who pointed out that no one calls Radio Shack by that name and that the new label reminds people of a place where very bad things happen.
SyFy
In another misguided attempt to position a brand as cool and cutting edge, in 2009 the SciFi Channel took on the new moniker SyFy. As justification for the odd change, the company offered two explanations: they couldn’t trademark the term “sci-fi” and that this is how someone in the 18-to-34 population would text it. Little did they know that “syfy” is a slang term for the STD syphilis.
Pepsi Cola and Tropicana Orange Juice
Strike two… In an attempt to remake some of its core beverage brands, PepsiCo partnered with design and branding company, the Arnell Group. The new designs were released in the beginning of 2009, namely to the company’s Tropicana Pure Premium orange juice line and it’s flagship Pepsi Cola line of softdrinks. The move generated an outpouring of consumer outrage, confusion, and derision.
The Tropicana carton was striped of the iconic image of an orange with a straw stuck in it, and was replaced by a generic-brand look. Sales instantly fell 19 percent, and the company announced a return to the previous design.
The Pepsi Cola logo underwent a minor alteration but generated a negative backlash when it was associated with a 27-page manifesto entitled “Breathtaking,” in which the tweaked image is compared to the Mona Lisa, the earth and its gravitational pulls, and the entire structure of the universe. Though the logo remained, so did the negative press.
The Gap
If it ain’t broke, don’t fix it. In October 2010, clothing retailer, Gap abandoned it’s ubiquitous logo consisting of a blue box with “GAP” written in white inside, for a slightly altered new version described by Marka Hansen, Gap’s president for North America, as a “…journey to make Gap more relevant to our customers.” The customers didn’t share his view, however, and a subsequent online blintz of criticizm and outrage forced the company to do an about-face within a week.
Xfinity
The company that everyone loves to hate, cable-television and Internet conglomerat Comcast is sinonomous with poor customer service and overcharging and is a frequent entry on various worst company lists. In a perplexing attempt to distance itself from these flattering associations, in Feburary 2010, Comcast began marketing its Internet video services under the new name, Xfinity, leaving customers and criters to wonder what exactly the name means. As a writer for Time quipped, “Will the name change work? Probably not, but at least it’ll sound a bit edgier when you’re put on hold … with Xfinity.”
Seen by consumer advocates and environmentalists as a “greenwashing” tactic, in 2000, BP tried to show a greener side with new “sunflower” logo and the slogan “Beyond Petroleum.” But that image was shattered beyond repair with the 2010 Deepwater Horizon opil spill that left a nation with unforgetable images of crude oil spewing out into the Gulf of Mexico and birds and sealife covered in oil.
Buffalo Sabres The fans of the National Hockey League team the Buffalo Sabres are no strangers to rebranding. After the team’s owners ditched its traditional logo, a buffalo jumping over two crossed swords, in 1996 in favor of a menacing looking beast, the second logo change in 2006 was a bit too much. Derided as a banana “buffaslug” and “the angry cashew nut,” the teams owners finally took the hint and reintroduced an updated version of the classic logo for the 2010 ice hockey season.
We all know that good credit is highly sought after. And should we forget, those catchy little jingles are there to remind us, prodding with “free,” instant online credit reports. But once you find out what your score is, you may still be left wondering what exactly it’s good for, and more specifically, what does it actually mean for those who own their own business?
Your credit score is especially influential if you’re a small business owner. In today’s competitive market, poor credit can adversely affect your ability to conduct business in a number of ways: it can result in difficulty securing necessary financing and better interest rates, among other possible problems. Here is a brief rundown of some ways in which your credit profile can affect your business:
Surety Bond Premiums
Surety bonds act as risk mitigation tools to help ensure that business owners and other professionals follow all licensing requirements and industry regulations. Because a surety provider could potentially be liable for your inability to perform, they charge an issuance fee directly related to you credit score, which is usually a pretty accurate indicator of an individual’s reliability. Having a credit score above 700 will typically allow you to purchase a bond from a premium underwriter who can provide a bond at a competitive rate. Applicants with credit scores below 700 usually have to work with underwriters who will execute bad-credit bonds. These principals will pay a significantly higher rate that could range anywhere from 5 to 20 percent of the bond’s penal sum. Sometimes high-risk principals must also provide additional collateral upfront before securing the bond.
Loan Interest
Because your ability (or inability) to pay off past debts in the past directly affects your credit score, banks heavily consider your credit score when determining whether or not to back you with a loan. If a lender does approve you for a loan, the interest rate you will pay on the loan will be directly related to your credit score. Typically, the lower your credit score, the more interest you will pay on the dollar. If you have a good credit score, you should expect to pay a much lower interest rate on your loan(s). Of course other extraneous factors may affect the interest rate you will pay, but your credit score is a major influence.
Partnerships
If you’re starting up a new enterprise with a partner or a group of peers, be sure to inquire into each of their personal and professional credit histories. If you cosign for a loan, the lender will consider the credit score of all signing parties. How your credit scores are treated for those going into business as together is similar to when a couple gets married and decides to take out a loan for a new home: the two credit scores are combined and then averaged to calculate an appropriate interest rate. Similarly, if you need to secure a surety bond that includes both of your names on it, the surety provider will consider both of your credit scores before giving you a price quote.
Insurance Rates
If you’re looking to purchase an insurance policy for your business or for your employees, your credit score will be taken into account so that the insurance agent can predict how profitable you will be and thus how likely you will be to pay your insurance premiums. Insurance professionals check your credit scores frequently, especially when it’s time for you to renew or change a policy. Thus, keeping your credit score in check is not only important for initial price quotes, but for maintaining your payments at low, competitive rates.
When it comes to starting up your own business, thinking about your credit score can be intimidating. But keep in mind that if you make wise and careful decisions ahead of time, you can use your credit score as a tool for your advantage.
This article was written by Kristen Bradley at SuretyBonds.com, which is an agency that issues surety bonds across the nation. SuretyBonds.com aims to help new business owners get their enterprises started off on the right foot. For more information on the surety bond industry, check out the Surety Bonds Insider Blog: http://www.suretybonds.com/blog/.
We’re not out of the woods yet… The National Federation of Independent Businesses (NFIB) recently reported that its quarterly Index of Small Business Optimism fell 0.6 points in December to 92.6, closing off the 36th consecutive month of a recessionary reading.
Of the small businesses surveyed, sluggish sales continue to be a primary concern, and the resulting drop in revenue has hampered hiring as well as capital expenditures. Here is a brief rundown of the findings in these three key areas.
On Sales and Inventories:
Though there was a slight uptick in overall consumer spending in the last quarter, most small businesses reported below average sales (36 percent) in the last three months as compared to the previous quarter. Only 18 percent of all owners reported higher sales. In response, many small business owners are liquidating their inventories (23 percent).
On Employment:
With sales leaving much to be desired, job creation has flat lined among those surveyed. Even employment projections for the next three months are paltry: 10 percent plan to increase employment, and 9 percent plan to reduce it, which translates to a seasonally adjusted net 6 percent of owners planning to hire new employees.
On Capital Spending and Outlook:
Like employment, businesses have been holding back on their capital investments. The percentage of those making capital expenditures over the past six months has dropped four points to 47 percent. Of those businesses, 35 percent spent money on new equipment (unchanged), 15 percent purchased vehicles (down four points), 11 percent improved or expanded facilities (down one point), 4 percent acquired new buildings or land for expansion (unchanged) and 8 percent spent money for new fixtures and furniture (down four points).
Even future capital expenditures will be subdued, with only 21 percent of business owners reporting that they plan of making capital outlays over the next few months.
If the thought of filing your business taxes makes you head for a bottle of Tums, then take a look at these five business tax tips to simplify the process. Learn how gain more control, take advantage of free or low-cost tax tools, and get educated.
1. Maintain clear records and know what supporting documents to keep. The first rule of business taxes is making sure that you have an effective and efficient system in place for recording your business’ financial transactions and keeping supporting financial documentation, such as W-2 forms, account statements, sales slips, paid bills, invoices, receipts, deposit slips, and canceled checks. These kinds of documents are important to hold on to because they support the entries in your accounting records and on your tax return. For more detailed information refer to Publication 583: Starting a Business and Keeping Records.
2. Get a good accounting software program. With the cost of commercial accounting software suites, such as QuickBooks Pro, becoming more cost-effective (especially when you factor in the available customer support) and with the emergence of several, quality free open source options, such as NolaPro, GnuCash, and TurboCash, Microsoft Office Accounting Express, you practically have no excuse not to use some kind of accounting software package in your business.
3. File your taxes electronically. If your income was $58,000 or less, you may have the option of filing with the IRS’s Free File system which offers free e-filing and tax preparation via commercial software packages. The service is only available via the IRS website. Even if your income exceeded that amount, e-filing is definitely the way to go. You can either file yourself via the IRS’s e-filing portal, or there are several commercial software programs, such as TurboTax, that can do it for you (in addition to helping you maximize your tax deductions).
4. Hire help, ask questions, do your research. When it comes to taxes, ignorance is not bliss- especially if it leads to an audit. If you are just starting out it may be worthwhile to hire a qualified accountant to make sure that you are filing your taxes properly. If you do not choose this option, then make sure you seek out support and knowledge elsewhere. If your using a commercial software package then take full advantage of the customer support. You can also head over to the IRS Small Business Tax Center, and sift through the countless, informative articles and tools designed to help business owners correctly file their taxes.
5. Know your tax payment options. Business tax filers who are unable to cover the full amount of their tax liabilities should make sure to still complete their tax returns with a partial payment and/or file for an extension by April 15th.
Be aware that the IRS allows for installment payments. Those whose tax liabilities total $25,000 or less can use the Online Payment Agreement (OPA) or download a fill-in Request for Installment Agreement, Form 9465 that can be mailed to the address on the bill. Those who owe more than $25,000 may still qualify for an installment agreement, but a Collection Information Statement, Form 433F (PDF) may also need to be completed.
With installment payments filers can indicate how much they can afford to send the IRS each month and on what day they will want to make these monthly payments. The IRS will generally accept an installment agreement if the amount owed is less than $25,000 and the balance will be paid within five years. For filers who owe less than $10,000 and fulfill other requirements, acceptance is guaranteed.
The 2011 tax season is in the air… In a last minute push through the door, the massive, bi-partisan legislation, the Tax Relief and Unemployment Insurance Reauthorization, and Job Creation Act of 2010, cleared Capital Hill. Now that the dust has settled a bit, there are several changes in the initiative that will effect those who own businesses. Here is a brief summary of these tax changes:
Employee payroll tax cut. The Social Security deduction from payroll will be 4.2 percent in 2011, down from 6.2 percent. The tax break will be available to both business owners and the self-employed.
Extension of business tax credits. Several business tax breaks were set to expire in 2009, such as the research credit and new-markets credit. They were renewed under the new legislation for 2010 and 2011.
Bonus depreciation. An extension was granted for 100 percent expensing of qualified business capital investments placed into service between Sept. 8, 2010 and Dec. 31, 2011.
Health insurance premium tax credits. Businesses employing fewer than 25 workers earning an average of less than $50,000 annually can qualify for a tax credit of up to 35 percent (based on a sliding scale) of their health insurance premium costs.
Work opportunity credit. This tax credit is for new hires that fall within one of the twelve targeted groups of people who have barriers to employment. The credit was supposed to expire in August 2011, but has now been extended through December for all the targeted groups except unemployed veterans and at-risk youth.
Sale of stock exemption. The full exemption of gain from sale of stock in a small business was extended through 2011.
Aside from the tax breaks mentioned above, two personal tax extensions may also affect the owners of smaller businesses.
Alternative minimum tax. Under the new legislation, the current AMT limits were extended for 2010 and 2011. It will exempt as many as 21 million households from having to pay the higher AMT rates.
Personal tax rates. The Bush-era tax cuts were extended for all income levels through 2012.
Here is a collection of the biggest blunders, bloopers, and dumbest business moves of the past decade:
1. The Bigger They Are, the Harder They Fall
Immersed in obscure accounting practices that concealed loses worth billions of dollars, Enron’s downfall at the end of 2001, will certainly be remembered as one of the most notorious scandals in history. In the end, Enron’s stock plummeted from a high of $90 per share in mid 2000, to just $0.10 a little over a year later causing stock holders to lose some $11 billion. With $63.4 billion in assets, Enron filing was the biggest bankruptcy in U.S. history until it was eclipsed by WorldCom the next year and Lehman Bros in 2008.
At its height, Adelphia Communications was the fifth largest cable provider in the United States. But that came to a pitiful end in June 2002 when founder John Rigas and his son Timothy were convicted for embezzling millions of dollars from the company, hiding $2.3 billion in debt, and deceiving investors about Adelphia’s profit and subscriber growth. Father and son received prison sentences of 15 and 20 years, respectively, and the company’s assets were later snapped up by Comcast and Time Warner in bankruptcy court.
3. 101 Ways to Save… What?!
In 2006, Northwest Airlines circulated a personal finance guide entitled “101 Ways to Save Money” among some of its employees. Though the “guide” contained some odd pieces of advice, such as “Don’t be shy about pulling something you like out of the trash,” the oddest part about it was the timing of its release. Shortly, thereafter, the bankrupt airline, began laying off thousands of airline employees.
4. A little Shut-Eye
During a routine service call for customer Brian Finkelstein in June 2006, a Comcast cable repairman falls asleep on the couch while attempting to call the company for assistance and being put on hold for over an hour. The incident was caught on video with an added soundtrack and Finkelstein’s voice-over lamenting Comcast’s poor equipment, absorbent prices, and terrible customer service. Needless to say, the video became a viral hit.
5. Never mind, I Take it Back…
As an apparent token of appreciation in June 2007, National Semiconductor, a maker of computer chips for the Apple iPod, handed out to every employee a version of the portable music player. Merely a month later, the company laid off 35 workers and demanded that they give back their iPods, claiming that the devices were company equipment.
6. Meet Your Biggest Fan… You!
September 2006 saw the emergence of “Wal-Marting Across America” a blog that chronicled the discoveries of supposed Walmart enthusiasts, Jim and Laura as they traveled across America in a RV visiting Walmarts along the way and chatting with happy Walmart employees. The blog was later exposed by BusinessWeek.com as a fake, a publicity stunt coordinated by Walmart’s PR company Edelman PR and paid for by Walmart.
7. I Get Knocked Down, But I Get Up Again
In June 2006, disgruntled AOL customer Vincent Ferrari calls AOL customer service to cancel his membership and records his experience. Throughout the duration of the 21 minute phone conversation, a “retention consultant” named John persistently tries to persuade Mr. Ferrari from closing the account even though he specifically asks to cancel it 18 times. “You’re going to let me speak,” John says. “If not, we can just argue all day. I really don’t care.” After ending the call, Ferrari posts the recording on his blog and it goes viral eliciting a ton of negative press for the ailing internet company.
8. One Final Request Before You Go…
After Bank of America announces in 2007 that it will outsource 100 tech support jobs from the San Francisco Bay Area to India, the current American workers are informed that they must train their own replacements in order to receive their severance payments.
In September 2009, the Bank of America came under fire when bank personnel in a Tampa, Florida branch refused to cash a check for Steve Valdez, who was born without arms and wears prosthetics because he was unable provide a thumbprint. Mr Valdez was refused even though the check was written to his wife’s account and he presented two forms of photo identification.
10. Underestimating the Power of Oprah
In May 2009, KFC ran a promotion for its new Kentucky Grilled Chicken by having Oprah Winfrey offer a coupon for a free meal both on her show and online. Instantly, more than 10 million people downloaded coupons and headed to their local KFC. Unable to keep up with the demand, the stores had to turn countless people away empty-handed.
11. An Act of God
In November 2009, London Times reporter John Arlidge conducted an exclusive interview with Lloyd Blankfein, CEO of the investment firm everyone loves to hate, Goldman Sachs. Goldman had agreed to the interview in an attempt to restore the investment bank’s tarnished image after a country dogged by high unemployment, home foreclosures, and tighten credit, watched the bailed-out bank ride out the recession unscathed while handing out mind boggling bonuses. Among the list of self-platitudes, the gregarious CEO affirmed that Goldman has a “social purpose” that “everybody should be, frankly, happy [about the bank’s success],” and that he’s “doing God’s work.”
12. You Can’t Have It Your Way
In November 2009, after its franchisees rejected a proposal for a $1 double-cheeseburger promotion, claiming that the promotion would make them to lose about 10 cents on each sale of the sandwich, Burger King Corp chose to run the promotion anyway. The National Franchisee Association, which represents about 80 percent of the stores in the U.S. filed a lawsuit shortly thereafter. A Miami federal judge later dismissed the case, and in April 2010 Burger King stopped requiring franchisees to sell the burger for $1, raising the price to $1.29. But the incident nevertheless left a bad taste in the mouth of those following the story.
In October 2009, a magazine ad for clothing designer Ralph Lauren, drew criticism and derision for featuring a model whose image was altered so that her head appears wider than her hips. Soon after other images surfaced. A cease and desist letter sent out by Ralph Lauren in response only fueled the flames, until the company was forced to concede, “After further investigation, we have learned that we are responsible for the poor imaging and retouching that resulted in a very distorted image of a woman’s body.”
14. United Breaks Guitars
In a classic example of the power of a customer complaint gone viral, during a trip with United Airlines in 2008, Canadian folksinger Dave Carroll watched helplessly out the window as the baggage-handling crew carelessly threw his band’s equipment on the tarmac. After arriving at his destination, Carroll finds that his $3,500 Taylor guitar has been damaged. In July 2009, after airline personnel refuse his claim for reimbursement, he writes a catchy song with a video called “United Breaks Guitars.” Though United Airlines eventually conceded, it wasn’t before Carrol and his band released three videos that today have over 12 million pages views, in addition to a wave of negative blog and press coverage. There’s even a Wikipedia page about it.
15. Out with the New; In with the Old
In an attempt to remake some of its core beverage brands, PepsiCo partnered with design and branding company, the Arnell Group. The new designs were released in the beginning of 2009, namely to the company’s Tropicana Pure Premium orange juice line and it’s flagship Pepsi Cola line of carbonated beverages. The move generated an outpouring of consumer outrage, confusion, and derision.
The Tropicana carton was striped of the iconic image of an orange with a straw stuck in it, and was replaced by a store-brand look. Sales instantly fell 19 percent, and the company announced a return to the previous design. The Pepsi Cola logo underwent a minor alteration but generated a negative backlash when it was associated with a 27-page manifesto entitled “Breathtaking,” in which the tweaked image is compared to the Mona Lisa, the earth and its gravitational pulls, and the entire structure of the universe. Though the logo remained, so did the negative press.
16. Take the Money and Run
After a US Airways flight made a dramatic emergency landing in New York’s Hudson River in January 2009, the too-big-to-fail insurance giant AIG tells passengers claiming medical expenses to file claims with their own health insurers and puts a cap on the number of therapy sessions for passengers traumatized by the experience to three.
In 2010, well after the collapse of the housing market, the attorneys general from all 50 states started to investigate the shortcuts taken by some of the biggest banks in repossessing hundreds of thousands of homes. Very quickly it became apparent that the workers assigned to handle he foreclosures were often under qualified. Some telling examples: a Wells Fargo employee claims that she was signing 300 to 500 foreclosure documents per day without reading them; some of the mortgage document processing work for Citigroup and GMAC was outsourced to companies in the Philippines and Guam; and at JPMorgan Chase, fresh hires brought into the overwhelmed mortgage departments were internally referred to as “Burger King kids.”
18. But I Thought We Were Friends?!
In September 2010, AT&T sends out what seems on the surface to be an innocuous message to its wireless customers thanking them for their business and drawing attention to its $18 billion investment in its network and other upcoming improvements in service. But the gesture elicits a backlash of angry customer sentiments, such as “I hate AT&T!” and “I’m only sticking out my contract because I don’t have the money to pay a termination fee,” that are promptly posted to the company’s Facebook page.
19. It Takes One to Know One
After Comcast was voted by Consumerist readers as the worst company in America in April 2010, competitor Verizon fires this tweet off from its corporate account: “One of the few times you’ll hear us congratulate Comcast.” In response, the Consumerist retorts: “Verizon should consider themselves warned that, of all the companies in the country, they did make our bottom 32.”
20. Sorry, I Can’t Hear You; I’m Eating Sun Chips!
After bungling a series of product makeovers, PepsiCo does it again in 2010 with new biodegradable packaging for its Sun Chips brand that reach noise levels greater than 100 decibels. Needless to say, the company switches back to the old, non-recyclable Sun Chips bags for five of its six flavors in October 2010.
21. The Secret to Good Page Rank? Put Down Your Customers!
A loophole in Google’s page ranking system allowed Brooklyn-based eyeglass retailer Vitaly Borker to rise to the coveted top spots in Google search results after garnering numerous complaints from customers claiming they were victims of harassment, abuse and fraud. As the New York Times reported, “It’s all part of a sales strategy, he [Borker] said. Online chatter about DecorMyEyes, even furious online chatter, pushed the site higher in Google search results, which led to greater sales. He closed with a sardonic expression of gratitude: ‘I never had the amount of traffic I have now since my 1st complaint. I am in heaven.’ “ Google later announces that it will make changes its secret search-engine algorithm.
22. To Fat Too Fly?
Kevin Smith, iconic over-weight movie director famous for his work with Clerks and Mallrats, took offense in Febuary 2010 when a Southwest Airlines captain ejected him from flight from Oakland to Burbank claiming that he poses a “safety risk.” In response, Smith sends off 50 tweets in a single day to his 1.6 million followers and generates a tremendous outpouring of bad press.
23. Touché!
Processed foods giant, Nestlé engaged in online warfare after Greenpeace UK posted a YouTube video about the impact of Nestlé’s palm oil production on endangered orangutans. Trying the strong-arm approach, Nestlé gets YouTube to pull the video claiming “copyright issues.” Greenpeace counters by giving Nestlé’s Facebook page a “facelift” that included a Kit-Kat logo altered so that it spelled the word “Killer.” After a few more rounds, Nestlé bows out, apologizes for its “rude” behavior, and later announces that it will change its source for palm oil.
As 2011 begins, small business owners and entrepreneurs have been expressing their hopes and concerns for the new year. The results of several widely distributed surveys show an optimistic leaning and most sources indicate that the economic heaviness of the past few years is beginning to lift. Nevertheless, many entrepreneurs and small business owners, seem to be tempering their optimism with a serving of caution.
Here are some of the more notable highlights:
View on the Economy According to a recent survey, Small to Midsized Business Business Plans for 2011 by Growbiz Media and online survey company Zoomerang, 72 percent of small business owners believe the economy will either improve or stay the same over the next 12 months.
View on Sales In the above Zoomerang study, 85 percent of small business owners are anticipating that sales will either increase or remain constant in 2011.
Marketing Expenditures In an earlier Zoomerang study, Small to Midsize Business Marketing Practices Survey conducted in November of 2010, approximately 15 percent of respondents plan on expanding their marketing budgets, with website development, direct mail, email marketing, and social media receiving most of the attention.
Plans to Hire Several surveys reported modest plans to hire. In the Zoomerang Business Plans study, 25 percent of small business owners indicated that they plan on hiring more workers in the new year, whereas in Inuit’s Small Business Outlook 2011 survey, a mere 6 percent reported that they want to expand their workforces.
Plans to Expand Business In October 2010, email marketing company ConstantContact conducted its Fall Small Business Attitudinal Survey and reported that almost 75 percent of respondents said they expect their businesses to grow in the upcoming year. These results are also reflected in Inuit’s Small Business Outlook 2011 survey, where 60 percent of respondents said they expect their businesses to grow in the new year- a 6% increase from December 2008.
When multiple people are involved in starting and building a new business, it is very easy to overlook what seems to be a small, mundane issue: how to divide founders’ equity. But, if a bit of forethought is brought in at the beginning regarding the definition of ownership and the anticipated compensation that each of the founding members will receive, then it can save a tremendous amount of headache and heartache down the road.
There is no clear-cut, easily agreed-upon formula for dividing equity. Equal division among those who started the company may seem to be the simplest option. Yet, it opens the door to resentment against founders who are viewed as less active in developing the business. Furthermore, while equal division reduces complexity, it does not fairly assess each founder’s work contribution. Dividing “fairly” demands greater reflection and serious thought about the value of various roles.
Among the factors to be considered are idea development, business plan preparation, marketing ability, and money contribution. Risk-taking, commitment, and responsibility also determine a founder’s value. The business’s founders have to take a nuanced look at these factors, and decide upon their worth. For example, the initial idea for a product or service is important, but useless if not developed or sold. Writing a business plan takes hard work, but it does not guarantee business success. Having many contacts improves one’s marketing prowess, but does not prove the sale.
Even when a founder provides technology or a clients, the value of each is not clear-cut. Perhaps the founder who raises business capital is more vital to the business. Likewise, a founder who quits a job to devote oneself to the new business might deserve more equity.
At the outset, deciding who will be considered a founder can be confounding. Usually, there are three main founding roles: the idea person, the marketing/business generator, and the CEO who can start and raise money.
When dividing equity, founders can expect to have heated discussions about the value of each one’s contributions. The following guidelines can help get the conversation moving in a productive way:
Implement transparency. Clearly outline performance expectations and evaluation processes. Well-understood goals and transparent decision will create an atmosphere of fairness.
Write an agreement. Don’t just talk about dividing founders’ equity, write it down. A written plan equalizes expectations, and can avoid arguments further down the line.
Delay incorporation. Before incorporating as an actual business, have the founders start working on development and sales. This gives each one a chance to prove his or her worth before determining the division of equity.
Hire legal counsel. Some might feel that there’s no need for the law among friends. Instead, founders who hire an attorney to represent them not only protect their own interests, but can extend the life of the friendship by avoiding future arguments.
It was recently reported that Save the Children, a non-profit organization dedicated to promoting child health and education, had rescinded its strong support of a soda tax after receiving grants worth millions of dollars from both Coca-Cola and Pepsi. Though the nonprofit may have walked away with full coffers, the negative fallout has reverberated throughout the nation, tarnishing both the organization’s reputation and work.
The plight of cash-strapped non-profit organizations is certainly understandable, but looking at the situation from the outside, I feel that it is an important lesson in image branding that businesses should take to heart. Even when trying to raise capital to run your business, be careful who you partner with; make sure that the arrangement is in line with your company’s core culture and values.
To drive the point home, here are few more examples of some notable, recent partnerships corporations have made with non profit entities that have raised some collective eyebrows, stirred up controversy, and blemished reputations.
“Coke Didn’t Make America Fat”
Coca-Cola is no stranger to controversy. In October of this year the American Academy of Family Physicians (AAFP) announced a new partnership with the ubiquitous beverage conglomerate, “to develop consumer education content on beverages and sweeteners for FamilyDoctor.org.”
Quick to capitalize on the sponsorship, Coca-Cola CEO Muhtar Kent sent in an op-ed piece to the Wall Street Journal, where he presented soft drinks as innocent scapegoats in America’s obesity problem. Lack of physical activity and unhealthy over-eating are making America fat, not Coke, her asserts.
In response to the sponsorship, several member doctors of the AAFP cut up their membership cards in protest.
Candy-Washing?
UNICEF Canada recently received some negative publicity for its partnership with the English candy company, Cadbury. The well-known, global nonprofit that focuses on children’s rights, health, and development, engaged in a three-year partnership with Cadbury (which just ended this year). Each year, 4 million packages of Cadbury candies were graced with the UNICEF name and logo. These packages were especially prevalent during Halloween, when countless children sustain sugar overdoses. In exchange, Cadbury made a donation of $500,000 to UNICEF to help African school children.
It turns out that Nestlé, the processed foods giant perhaps best known for its chocolate and instant coffee products, is concerned about the health of its customers. It was recently reported that the Swiss owned company is launching its Healthy Kids program in China. Working with the Chinese Nutrition Society, the program aims “to improve the nutrition, health and wellness of children aged 6-12 in both urban and rural areas, by promoting nutrition education, balanced diet, greater physical activity and a healthy lifestyle.”
Though you might question the “education” that this program may be offering, Nestlé actually has a history of promoting nutrition, a balanced diet, and a healthy lifestyle. Consider that in June of this year, Nestle sent a “floating supermarket” along the Brazilian Amazon to reach rural communities that don’t have access to major processed food brands. As reported by Bloomberg, “The vessel will carry 300 different goods including chocolate, yogurt, ice cream and juices.” Sounds healthy to me!
Fried Chicken for a Cause
Earlier this year the Susan G. Komen for the Cure organization, made a corporate partnership with KFC that caused a stir among the organization’s supporters. In the Buckets for the Cure campaign, for each pink bucket of fried chicken purchased, 50 cents went to the well-known U.S. breast cancer charity. Many were appalled at the partnership which matched the health campaign with a product that promotes obesity (a known risk factor for breast cancer). Moreover, the arrangement came on the of heels of KFC’s introduction of a new sodium and fat laden menu item: the Double-Down “sandwich,” a heart-stopping concoction of fried chicken, cheese, and the Colonel’s “special sauce.”
Over the past few years, the American Cancer Society (ACS) has received a great deal of criticism from countless critics who are quick point out the organization’s apparent conflicts of interest particularly within the medical and pharmaceutical industries. Many of the ACS’s own board members are top executives in major medical and pharmaceutical firms- the same firms that stand to benefit from the very same chemotherapy, radiation therapy, and cancer screening procedures that the ACS so strongly recommends.
In recent years, the ACS has also been involved in a number of high profile corporate sponsorships, like the $1 million it received from SmithKline Beecham for the right to use its logo in ads for Beecham’s NicoDerm CQ and Nicorette quit smoking products. Not surprisingly, the ACS’s anti-smoking campaign has been its most focused yet.
