Earlier this week, President Obama signed the Dodd-Frank Wall Street Reform and Consumer Protection financial reform bill into law initiating a sweeping reform of financial regulation. While the new legislation is meant to target big banks, it turns out that many small businesses may also be affected.
The bill’s provisions attempt to protect consumers by regulating lenders. Any business that permits payments in more than four installments or assesses late fees will be considered a lender. Of course, that applies to any small business that competes with big businesses by offering short-term credit to loyal customers.
Both business owners and customers may feel the pinch when the bill goes into effect. Small businesses will be forced to use an approved bank to offer payment plans instead of just offering credit on their own. Owners will have to pay bank fees, and customers will run the risk of being denied credit.
This possibility has not gone unnoticed. A survey by the U.S. Chamber of Commerce has found that 57% of small business owners lack confidence in the financial reform legislation. In fact, they fear it will not prevent another financial industry meltdown.
According to U.S. Chamber of Commerce president Thomas J. Donahue, growth and jobs in small businesses will suffer when this bill is implemented. He views the increased costs of regulation and insurance as detrimental to the economy. As access to credit becomes more elusive, small businesses will have more difficulty growing.
Political pundits are predicting heated congressional elections this November. Republican supporters are determined to retake both the Senate and the House on the coattails of growing skepticism and discontent among voters with the current administration. If the Republicans succeed in increasing their number of seats, small business owners can expect to see changes in major legislative issues that affect them.
Healthcare reform is a central target of Republican law makers. They have pledged to change the plan President Obama implemented. Small business owners who have been opposed to new requirements to offer healthcare coverage to employees may feel vindicated if the Republicans manage to repeal the healthcare bill.
Also at stake in the $30 billion proposal by President Obama to encourage lending to small businesses. The Small business Lending Fund Act was passed by the House of Representatives without any Republican support. Republicans are strongly opposed to the plan, which they say resembles the $700 billion Wall Street bailout. So, if the Republicans prevail, small firms will probably continue to have difficulty accessing credit from banks.
Despite his promotion of the Lending Fund Act, many small business owners have been unhappy with President Obama’s performance. The American Small Business League reported failures by the Obama Administration to effectively help small businesses. Among their complaints are the failure to stop the diversion of federal small business contracts to large corporations, the failure to allocate more stimulus funds to small businesses, and the failure to fund women-owned businesses.
Yet, given a Republican majority chances are these requests will fall flat. The GOP’s focus historically involves spending cuts and deficit reduction, rather than on stimulus payouts.
Regardless of which party triumphs in the coming elections, small business owners may have to accept several changes in the policies that impact their operations the most.
It’s well known that small retail businesses often struggle against their big corporate competitors. And with the rise of Internet-based retail, the economies of scale are tipping even more in favor of the mega firms that have the resources to invest and can offer a wide range of merchandise at cut-rate prices. But a new study by economists at the University of Chicago offers small business owners a ray of hope. It suggests that by providing niche goods or services, the smallest of businesses can not only survive, but thrive.
“E-Commerce and the Market Structure of Retail Industries” (Economic Journal, June 2010) examines how the marketplace has changed due to the internet. The researchers reviewed three aspects of commerce: prices, industry structure, and jobs.
As expected, all three arenas have changed in ways that support large firms. Customers who are savvy about price comparisons have caused retailers to drop prices in order to compete. Large firms have increased their numbers, while numerous small ones have seen their doors shut. Accordingly, employment rates have dropped within industries that gravitated toward online sales.
Fortunately, these changes do not spell doom for all small businesses. The study also found that informed consumers turn to retailers who best cater to their needs. By offering specialized or high quality goods and services and by focusing on good old fashioned customer service, small businesses can gain and hold on to a loyal customer-base.
E-commerce may squeeze out some small businesses, but it also offers unprecedented opportunity to create a niche and reach potential customers.
One of the positive outcomes of an economic slowdown is the innovation that can come out of it. As businesses big and small scramble to capture precious consumer turf, what has emerged is a bold, new attitude in business marketing. All the sluggish sales and depleted consumer confidence were no doubt the driving force behind a recent flurry of marketing promotions that are more creative and daring then ever. Here are a variety of examples of some of the most unusual and creative marketing campaigns over the past couple of years.
Guerrilla Marketing At Its Best
Guerrilla marketing thrives on the unexpected and unconventional, the goal being to create an impressionable, viral buzz.
Heineken Beer:
A prime example of a well executed guerilla marketing campaign is Heineken’s boldly staged fake event held on the same date and time of a UEFA Champions League match between AC Milan and Real Madrid on 21 October 2009. Instead of watching the soccer game, over a thousand unsuspecting people (from boyfriends to employees) were basically forced to go to a classical music concert.
And also from Heineken is the famous Walk-in Fridge commercial.
Simultaneously, some big Walk-in Fridge cardboard boxes were put on the streets of Amsterdam on garbage day, suggesting that the huge fridge was really for sale and that people were buying it.
Burger King -WhopperFace:
This one’s from Brazil, highlighting a more personalize approach to receiving your burger: you get what you want… with your face on it.
The Mini Vs Porsche:
The CEO of Mini challenged Porsche to a well-publicized race…
Environmentalists may have not appreciated this online insurance company’s stunt (unless biodegradable bubble wrap was used) but it definitely made an unavoidable impression.
And here is a collection of some of the best guerilla and ambient marketing schemes from around the world:
KitKat
TV Series Trueblood
“Ugly Betty”
Ibuprofin
Nivea
Barbeque Sales
Campaign against gaffiti
Charity
Campaign against smoking
Copenhagen Zoo
Nikkon Cameras
Volkswagon
Rock radio station
Exterminators
Hair stylist
McDonalds
Whiteout
Fitness Company
Monday Hot Wings Promotion
The Discovery Channel
Don’t forget to brush your teeth…
Body piercing
Coca Cola New Grip Bottle
Buy better dog food, or else…
Lipton Tea
Golf GTI
Ikea
Other Notable Examples of Unconventional Marketing
Retail Stimulus
Aside from guerilla tactics, numerous businesses are choosing other forms of unconventional marketing. For example, with government incentives winding down, some US retail chain stores are offering special discounts and unprecedented large-scale loans to get business rolling.
Sam’s Club, Target and Toys “R” Us are trying to regenerate sluggish sales via unconventional promotions. With the cooperation of the SBA, Wal-Mart’s Sam’s Club is about to launch a program that will offer shoppers loans of up to $25,000. Toys “R” Us is about to kick off a holiday fund program which augments shoppers’ savings, and for a cent or at no cost, Office Depot is giving away office products. Not to be left behind, Target will grant its credit card holders 5% discounts.
Target Bullseye Gives Campaign
Some businesses are taking a more philantrophic route. Retail chain Target gives a whopping 5% percent of its income to charity. In May of 2009, it allocated these funds to charities via its “Bullseye Gives” campaign on Facebook. The company announced that it would dole out the money – which totals about $3 million every week – to charities that were selected by Facebook users.
Ikea’s Facebook Furniture Giveaway
At the end of last year, Ikea chose to harness the power and reach of the social media mega site, Facebook, to promote a new store in Malmo, Sweden. In the campaign they created a Facebook profile for store manager Gordon Gustavsson. They uploaded images of furnished and decorated showrooms to his photo album and promoted a photo tagging giveaway. The first person to tag an object got to take it home. The enthusiasm knew no bounds – users embedded the link on their profiles, with their newsfeeds stoking the viral epidemic. Ikea may have given away a couple thousand dollars of merchandise, but it also successfully advertised the opening of their newest store and generated worldwide recognition for their brand.
All in all, marketing efforts in the past few years have become increasingly out-of-the-box for obvious reasons: When it comes to fighting the aftershocks of an economic earthquake, conventional just doesn’t cut it.
According to the Discover Small Business Watch, small business owners are experiencing cash flow problems, leading to reduced economic confidence. Business owners’ economic confidence decreased in June. Previously, it had risen for two consecutive months.
More than half of all small business owners said they feel the economy is getting worse. Reflecting this sentiment, a full 51% reported cash flow problems. As a result, they had trouble making payroll and paying vendors. Business development suffered, as well with 43% of small business owners reporting that they had planned cutbacks in advertising and inventory.
Current events are contributing to business problems, according to many surveyed: 51% blamed the stock market for their troubles, 40% of small business owners sited that Europe’s debt crisis is having long-reaching effects, causing their businesses to falter., and 30% believe the Gulf oil spill has been negatively influencing commerce.
American business owners remain optimistic, however with 53% of respondents reporting that would they not take a job working for someone else, even if they were offered more money. Nevertheless, 40% of small business owners have considered altering their business model or switching their line of business. The main challenges they cite are government policies and regulations, and finding new business.
One of the keys to small business success during difficult economic times is finding the right balance between doing things in-house and outsourcing those tasks. Small business owners looking to keep their inventory stocks low and their cash flowing may want to consider using the services of an outside drop shipping company.
Drop shipping allows retailers to take customer orders and direct them to a drop shipper, or wholesaler, who then ships the merchandise directly to the customers. The retailers profit by charging customers more than the wholesalers charge the retailers.
Drop shipping clearly has advantages over traditional retailing. For one, business owners don’t have to lay out money to keep items in stock. In addition, the business owner can maintain a positive cash-flow cycle: the seller is paid when the customer makes a purchase, but he or she can delay paying the wholesaler by paying with a credit card. Moreover, the retailer saves on shipping costs, because one warehouse packs and ships all the merchandise.
Like all business trends, drop shipping has potential pitfalls. Here are a few quick tips on how to effectively use drop shipping in your business:
Do some research before agreeing to work with a particular drop shipping company. Drop shipping attracts some of the biggest scammers on the web. Some people who claim to work as wholesalers are essentially middlemen who connect you to actual wholesalers. These swindlers then retain most of the profit. Avoid this trap by using good sources, such as trade shows, to find wholesalers. You can also check out worldwidebrands.com and salehoo.com for up-to-date lists on verifiable wholesalers.
Safeguard your own reputation. The drop shippers represent you. Poor customer service and sloppy packing reflect poorly on your business. If the drop shipper back orders products for a lengthy period of time, impatient customers might cancel their orders and never return to do business with you. Before using a drop shipper, check the policy on back orders and returns.
Assess your profit margin. Of course, you pay the drop shipper for the service. Determine whether the price differential between what you charge the customer, and what you pay the shipper, is enough to warrant outsourcing your business’ inventory management and shipping.
After considering the various pros and cons, you have decided to sell your business. Over the years you may have invested a good deal of sweat, hard work and energy (not to mention cash) into your “baby.” But knowing how to put a price tag on your investment can be difficult. Nevertheless, you certainly want to get a fair price.
What factors should you consider when evaluating your business’ net worth?
There are a number of facts you need to know. First, keep in mind that there is no exact science when it comes to determining the value of your venture. Be that as it may, smaller businesses tend to sell for 2 to 4 times cash flow. In the event of a very small business, the multiple could be as low as one. On the other hand, mid-sized businesses may sell for 3 to 6 times cash flow. This multiple could be even higher for some businesses.
Here are some tips on how to come to a reasonable value for your business:
Look at your business’ cash flow. Cash flow is a vital element in determining your company’s value: Smaller businesses are evaluated based on Seller’s Discretionary Cash Flow (Owner’s Salary & Benefits + EBITDA (Earnings before Interest, Taxes, Depreciation, & Amortization). Mid-sized businesses are generally evaluated at EBITDA or EBIT (Earnings before Interest & Taxes).
What does the future look like? The actual value of a business is dependent on its future performance. Future performance depends on the business’ current performance and forecasts for the future, as well as what the buyer actually plans to do with the business once acquired.
What is the buyer’s ROI? The buyer’s Anticipated Return on Investment (ROI) is also a vital factor affecting a business’ valuation; the higher the potential return and the lower the risk involved, the greater the value. But, where the risk is high, like for example, where sales are historically inconsistent, then the lower the value of the business, even if things could change in the future.
Take stock of both hard and soft business assets. A company’s assets are an important factor to consider when determining value. There are hard assets, such as equipment, furniture, and inventory, and there are soft assets, such as patents and software. Are all of the business’ assets for sale? Do you plan to include accounts receivable and inventory?
What is the business’ history? Has it built up a good image or brand? Is there a loyal customer base? Will the current workers stay with the new buyer?
What does the market look like? Is this business operating in a volatile or high risk industry, such as food services? Is there a lot of competition from other businesses?
Evaluating your business properly is not a simple undertaking since it concerns several factors, many of which are hard to quantify. It is recommended that business owners looking to sell their business consult with an expert in the field in order to reach a realistic estimated price.
A disaster, natural or otherwise, can cause enormous loss to your business, effecting vital data, equipment, realestate, and your customer base. Even an event on the scale of a brief electrical outage can create havoc on computer files and phone lines. But if disaster suddenly strikes, it doesn’t have to mean that all is lost. With proper planning, your business will be able to recover and continue to thrive even after a disaster.
Here are several steps you can take both before and immediately after a disaster strikes to help keep your business safe and ensure a smooth rebound :
Prepare in advance. Buy adequate business insurance, including flood and earthquake coverage. Keep backup computer files and copies of paper files, including customer and employee contact information. Store them at a location several miles away from the office. Give employees a method of reaching the business in case of emergency.
Contact your insurer quickly. File claims ASAP after a disaster strikes. The insurance money will help you to continue running the business and make necessary repairs.
Consider other locations. If your office has become inoperable due to a disaster, look for temporary quarters. You might be able to use your own home, or another local business that will allow you to use their facilities on an emergency basis.
Keep employees informed. Your employees have to know whether and where the business will continue to operate. You have to know whether employees can help you assess and clean up damage, or if they have been harmed by the disaster too.
Update suppliers and vendors. If your business is physically unfit to accept deliveries, you have to halt your orders. Conversely, if the supplier has been affected by the disaster, it’s important to know, so you can find alternate suppliers.
Maintain customer relations. It is imperative to let customers know whether and when you will resume business as usual. Post new signs on the door of your business every few weeks, and send out mailings about your status.
Investigate aid. Federal and state loans can provide assistance in disaster areas. Some local industry groups might also offer financial aid. Learn about and take advantage of these.
A disaster can easily destroy a business, preventing it from ever reopening. Proper planning and immediate action can subvert such devastating outcomes.
For small businesses that rely on technology, even those with modest usage (ie a computer with Internet access), maintaining the integrity of sensitive data, such as names, social security numbers, pin numbers and access codes, is a vital priority.
So what can your small business do to protect its valuable data? Keep in mind that we are talking about digital poaching, so leaks and hacking prevention must take place in the digital sphere. Here are several vital security tips to protect your business’ confidential data against would-be hackers and thieves:
Use data encryption software. Be sure to encrypt sensitive data and always use the newest protective software. Encryption entails assigning a secret code that prevents unauthorized parties from accessing your data. Use at least WPA2 encryption on your wireless networks to protect them from hackers.
Install up-to-date anti-virus software. Look for antivirus products that include anti spyware and anti-phishing security features, and make sure to install this software on all of your computers.
Back up your data.Making a physical backup of your small business’s information is a necessity that many small business owners overlook. There are several reliable data backup solutions on the market, including backup software programs, tape backups, external hard drives, and off-site backup services.
Activate firewalls on all of your computers. Although firewalls are unable to stop all of the attacks, they definitely reduce some risks, such as if another computer on the network is compromised by hackers.
Run updates regularly. Protecting your computers against hackers is an ongoing task. Hackers make it their business to locate new vulnerabilities on your computer operating systems and networks. Have automatic updates enabled on your Windows-based computers. That way, when security fixes are released from Microsoft, updating of your computer systems will be automatic.
Ensure employee cooperation. Get your employees to change their passwords periodically and use general security tools to ensure that their home computers are safeguarded against attacks and malicious programs. If possible, have employees use non-administrator accounts (standard users). Due to the fact that most exploits are accomplished these days through email, web browsing, and infected USB devices, activate parental controls to restrict what can be installed on your computers.
Research your Internet service provider. The company providing you with Internet access often offers other parties easy access to your private information. Look into its past records. Has it ever been hacked? Also, make sure to use an email service that filters spam and viruses before they can reach your account.
Conduct online banking and install financial software on a dedicated computer. Set up a non-administrative user account and parental controls to restrict what websites this computer can visit. This is a highly effective way to block the most common method used by hackers to steal money from small businesses. Malicious software sniffs your online bank credentials, which are used to transfer funds directly to money mules. Using a dedicated computer with only financial applications can help to keep your information private.
When it comes to information security, prevention is the key. Don’t wait until it’s too late.
Collective buying, or group buying, is a new trend that benefits businesses and consumers alike. Group buying websites, such as www.groupon.com, offer discounts on goods and services. Unlike traditional coupon sites, they encourage consumers to spread the buzz and bring in other customers by guaranteeing the bargains only if enough customers take advantage of the promotion.
These sites, which are quickly gaining in popularity, offer a cheap way for businesses to advertise and drum up business. For example, www.buywithme.com writes up the information provided by the business, and then promotes the deal with online contests and email blasts. Potential buyers use social networking to encourage others to sign up for the deal. One website, www.livingsocial.com, provides buyers with a special link to send to friends. If a buyer persuades three people to purchase the voucher, that customer receives it for free.
Compared to other advertising methods, group buying offers instant revenue and brand promotion with a clear return on investment (ROI). Within one day, business owners know exactly how many people have taken advantage of a particular promotion. They receive immediate payment for purchase of their vouchers. Even if the buyers never redeem their coupons, business owners retain the payments.
As an added bonus, collective buying exposes your business to a new demographic. Group buying websites have a vast audience of deal-seekers who are motivated to spread news of a good offer.
Viewed from any angle, this business opportunity has a lot to offer. Dream up an offer that customers can’t refuse, and find a collective buying website to market it.
