Inside The American Recovery and Reinvestment Act

What is the American Recovery and Reinvestment Act doing for small business? The SBA says it is an effort to jump-start our economy, create or save millions of jobs, and ensure our nation can meet the challenges of the 21st century. The Recovery Act assigns a key role in this effort to the U.S. Small Business Administration, providing it with program tools that offer new economic incentives to small businesses and lenders alike, all aimed at growing our economy through job creation, re-starting lending, and investing in small businesses and the entrepreneurial spirit of Americans.

• Provides entrepreneurs and lenders financial relief from the current economic crisis that will help encourage borrowing and lending to all small businesses, including start-ups
• Offers businesses access to the capital and the tools they need to drive economic recovery and to create and retain jobs
• Helps unlock credit markets for small businesses
• Temporarily eliminates some loan fees for borrowers and lenders

The bill is divided into nine key components, including:

• Temporary Elimination of Loan Fees • Temporary 90 percent Guarantees
• Secondary Market Liquidity for Section 7(a) loans, SBA’s largest loan guarantee program, which serves a wide variety of small business borrowing needs
• America’s Recovery Capital (ARC) Stabilization Loans
• Expanded Microloans
• Surety Bond Program Expansion
• Secondary Market for First Mortgages associated with Section 504 Certified Development Company loans, which support small business capital-asset and real-property investments
• Expanded Refinancing Project for Section 504 Loans
• Small Business Investment Company Program Expansion

SBA is working to implement these elements with the goal of having the broadest impact on small businesses as rapidly and effectively as possible. To learn more, follow the link.

Basics of Buying a Business

Buying an existing business can be a less risky and more quickly profitable venture than starting your own business from scratch. But it’s not entirely risk free and your success will depend heavily on how you choose and evaluate the business you buy.

Financial Statements

Look at both financial statements and tax returns form the past 3-5 years to judge both the current fiscal health and financial trends. Make sure you see figures that are accompanied by an audit letter from a reputable CPA. Don’t accept a simple financial review or a compilation because those are based on figures supplied by the company. Is this business in sound financial condition? Do the financial statements match the tax returns? Are sales and operating ratios in line with industry standards? Your accountant can help you analyze these figures to determine the net worth of your company.

Payables and Receivables

Check the dates on invoices to see if the business is keeping up with its bills. Normal payment times vary from industry to industry, generally 30 to 60 days is standard. If bills are being paid 90 or more days past the invoice date, the owner may be struggling with cash flow. Also find out if any liens have been placed against the business because of unpaid bills.

 Inspect the accounts receivable with a skeptical eye: often their stated value is somewhat inflated. Take a close look at the dates on them to determine how many are delinquent and by how long. This is important because the older the receivable, the lower its value and the greater the chance that it will never be paid. While you’re at it, make a list of the business’ top ten accounts and run a credit check on them. If the majority of customers or clients are creditworthy but are late to pay, you may be able to solve the problem with a more rigorous collections policy. If the clientele is financially unstable, start looking for another business.

 Employees

You need to determine how critical the employees are to the success of the business. You also need to look at their work habits to determine if these are people you can work with. How long have these key employees been with the company? Will these people remain with the company after a change of ownership? What incentives will you have to provide to get them to stay? Can any key employees be easily replaced? What are their relationships with customers and would customers follow any of these employees if they were to leave? Also look at the role the current owner plays in the company. Is this a role you want to play? Are there any current employees who can take over those responsibilities if necessary?

Tune in for “Small Business Focus”

Today’s radio broadcast of  “Small Business Focus” features discussion on “The Coming Wave of Entrepreneurship” and its new trends for aspiring and established business owners.

We’ll also talk about a surprising business acquisition in nearby Clare, Michigan involving members of the city’s police force.

“Small Business Focus” can be heard every Wednesday from 10:30 to 11:30 AM, either online or on the radio airwaves, as part of WMKT’s “Vic McCarty Show”.

Retailers Should Start Building Offseason Business Now

If you’re the owner of a retail business in Northern Michigan the long wait is over. For months you’ve likely anticipated the busy summer season that officially kicks off this weekend. Unless you want to be continually caught up in the reliance on seasonal walk in traffic, now is the time to take steps to diversify and build up reasons for people to shop with throughout the year. There are essentially three components to building up your year-round business portfolio.

 Step one involves collecting customer names, either the traditional way by requesting home mailing addresses (primary address if the customer is only here for the summer or a short vacation), or by asking for the customer’s email address. The idea is to take the captive audience member that have come into your store, and make them aware of new product offerings, special events, or buying incentives. Some customers will resist the urge to give up their email or mailing address, but offering a small gift item can be quite persuasive.

 Use the accumulated names to keep in touch with your customers even when they are hundreds of miles away during the offseason. The traditional postcard mailings to update customers are quickly being replaced by less expensive email campaigns with programs such as “Constant Contact“.  It’s good to still utilize both with regular updates publicizing new products, sale items, or upcoming special events.

 The next step is to make customers aware that you are able to ship items, offer a gift registry, and have a functioning up-to-date web site that offers at the very least, a few top selling items via online sales. Locally made products do well in these situations, and customers who visit northern Michigan tend to have a strong emotional attachment to the region.

 The final step is to offer your own exclusive products or products. The key is to have an items or items that you exclusively offer. It can be as simple as a clothing item with a local theme or a local food item or a unique line of artwork that you make yourself.

 This effort to build a core of offseason business will eventually improve your store’s cash flow and increase overall sales. But the effort needs to happen now while the traffic in your bricks and mortar store location is at its peak. Once this customer retention program is in place, online and social marketing tools (as previously discussed) can be integrated into the process.

 For more information on retail merchandising and marketing, call the Traverse City office of the Michigan Small Business & Technology Development Center (MI-SBTDC) at 231.922.3780.

2009 Michigan Small Business Resource Guide

America is a country of entrepreneurs. It was built by entrepreneurs, and over the years, our economy has grown on the strength of our entrepreneurs. America has an economy that regenerates, is flexible, and adapts to opportunity. The U.S. Small Business Administration plays a vital role in enabling America’s entrepreneurs and small business owners.

 Through a wide array of services – loan guaranties, assistance for small businesses in federal contracting, and business counseling – the SBA has helped millions of entrepreneurs start and grow their small businesses. The agency continues to expand our support for small businesses. They currently guarantee more than $75 billion in loans and investments; our resource partners’ in Small Business & Technology Development Centers network centers provide counseling to more than 1 million entrepreneurs every year; and we helped small businesses secure close to $80 billion in prime federal contracts.

 This resource guide is your roadmap to all of our valuable products and services. We hope that you’ll read it closely; the SBA team has worked hard to ensure the information here is useful and up to date.

 In addition, we encourage you to visit your local Michigan Small Business and Technology Development Center Region 2 office by phoning (231)922.3780, which is your portal to SBA assistance and can help you start and grow your business. Click here to get the guide!

SBA ARC Loan Program

If your small business is stressed meeting expenses during these economic times, the U.S. Small Business Administration has a new loan program designed just for you.

SBA’s America’s Recovery Capital Loan Program can provide up to $35,000 in short-term relief for viable small businesses facing immediate financial hardship to help ride out the current uncertain economic times and return to profitability.  Each small business is limited to one ARC loan.

ARC loans will be offered by some SBA lenders for as long as funding is available or until September 30, 2010, whichever comes first. 

SBA Participant Lender Fact Sheet

About the ARC Loan Program

ARC Loan Eligibility

Applying for an ARC Loan

Learn How SBA Can Help

If you would like to speak directly to a SBA customer service representative about the ARC Loan Program, please call the toll-free number (866-947-8081) Monday through Friday during the hours of 8am to 9pm (Eastern Time).

Online Tools Make the Difference

In case you missed it, the marketing game has changed of late, with new tools available for a growing business that complement traditional forms of advertising. Here’s a quick breakdown of the new tools and how they can be utilized.

Web sites: A surprisingly large percentage of businesses still don’t have a simple one page informational web site. Anyone under the age of 35 is likely to search for a business online instead of looking through the traditional yellow pages. It’s easier these days to use a formatted web template than having to make the huge investment in a web designer (not that web designers don’t have a role later). Make sure you have the ability to change the content on the site and install a site meter device to gauge and measure who’s coming and going to the site.

Blogs: A blog site can be the perfect compliment to the static web site, especially if you like to write. Quick updates and related content go a long way in building a community of like minded customers. Blogs are free and help your business rise quickly in internet search engine.

Facebook: The worlds of personal and business collide on Facebook, but the site built for social networking can be a useful business marketing tool. It’s easy to set up a group page on Facebook that Facebook users can recommend to their friends. The idea is to have others spreading the word of your product or service to others in a virtual world that has no defined geographic boundaries.

Twitter: An acquired taste, Twitter is quickly becoming accepted for business networking and for posting timely announcements and informational pieces that can be read and recommended to others.

These new online tools can quickly build on the traditional forms of targeted marketing and advertising. Those who don’t adapt and begin to understand this new online component will be at a significant competitive disadvantage.

Word of Mouth Marketing Requires Old and New Techniques

We talk a lot about effective and inexpensive ways of marketing our businesses, and creating that elusive “word of mouth” message that can magically take our product or service to a wider audience. For years small businesses relied on loosely defining a target market, many times with not really knowing who the true target was to begin with.

 Today’s consumers are more sophisticated in both the way they selectively get their buying information, and with the products they look to purchase. In the course of a day we receive exponentially more advertising offers than we did even five years ago. By default we also become more hip to offers that in the past we would have listened to. This weariness of traditional advertising efforts make people talk more and look to others they trust (more than lame ad offers) for cues to what to buy.

While the traditional model of using advertising that reaches a targeted demographic, the internet provides the opportunity to build a “community” of like minded people who find out about the niche your company fulfills and spread the word to others.

This shift to a more permission based marketing model includes many online techniques and features that for the most part involve very little monetary investment. This doesn’t mean that your business should not have a strong foundation of the traditional advertising means (that requires a traditional advertising budget). It does mean that a combination of the old and the new should be used to track your customers, know their motivations, and make a sustainable effort to “keep them in the fold”.

Keeping the Customers you Already Have

By Chris Wendel                                                                 

The process of turning a one-time customer into a repeat long-term buyer is never an easy task. In this world of competitive pricing, web based competition, and multiple buying choices; one has to be savvy to keep customers around.

It’s estimated that the average American company loses 15 to 20 percent of its customers each year, and most companies spend two times the money on acquiring new customers than on a simple program that can help keep the customers they already have. Placing even a small effort into a customer loyalty program can incrementally build a company’s sales.

Stuck with what to do next? Here are some simple steps to build customer allegiance:

1. Simple manners: Greeting a customer when they walk in the door, and thanking them when they do buy from you are fairly obvious gestures. Yet in today’s hectic world these basic elements of the customer experience are many times over looked.
2. Know your customers and call them by name. Again this is applied common sense. If your mental Rolodex can’t retain your customers’ names, write them down (along with addresses and other pertinent information), or better yet develop a customer database, and refer to it regularly. Learn to be sincere when addressing your customer by name, not canned in your delivery
3. Remind customers about product benefits. Customers may not make repeat sales because they don’t understand how the product or service they purchased works. Offering your customers classes or taking the time to explain things further, shows that you have their best interest in mind.
4. Develop customer rewards programs: Events and special event promotions for previous customers can be promoted through direct mail postcards and a well coordinated email program. Of course building a strong customer list is a must here (refer to step #2).
5. Inform Customers of all of your services: Spell out the full range of your products and services to customers on a regular basis. This can be communicated through newsletters, sales calls, and brochures.
6. Have an organized email and direct mail program: This would incorporate at least 3-4 mailings to established customers a year. Simple postcards combined with an annual newsletter or catalog keep your name in the mind of your customers, and are proven to help with customer retention. Emails sent through programs such as Constant Contact can replace the more expensive mailings as your email list develops and grows.
7. Update your website regularly: A stagnant stale web site makes it look like your business hasn’t changed much either. This doesn’t mean that you have to perform an entire redo of the site. Simply announcing store hours, your phone number, what brand of products you carry, and special services can work wonders here. A secondary blog web site can compliment your regualr web site with more timely information that facilitates conversations with loyal customers (that also bring new customers into the fold). Setting up a blog is free, easy, and the updated information moves you quickly up internet search engines

The time and money spent to increase customer loyalty is a small investment to make compared the higher costs of trying to win back a lost customer. Making it easy to shop with you is essential for preventing your clientele from going elsewhere.

For more information on this topic and the other business services of the MI-SBTDC in Northwest Michigan, call 231.922.3780.

Knowing When to Get Out

Chris Wendel

Several years ago while visiting the Gulf Coast of Mississippi, I heard many stories from business owners who were weighing the costs of rebuilding their business versus simply selling the remaining rubble and land, and skipping town. 

Extreme conditions forced these business owners to make life-changing decisions with their business exit strategies.  Though these resolutions were more or less forced, every business owner should have an exit strategy in mind from the first planning stages of a business.

Typically most people don’t ever consider how they will get out of business before going into business, but as a business counselor, this is paramount to a set of questions I like to ask.  These are also questions you may wish to ask yourself:

• How long do you plan to operate and be a vital part of the business?
• When you move to the next phase of your life, (i.e., retirement), what will happen to the business?
• When you decide to get out of the business, will you sell it to partners or family members? 
• Will you sell the business before it approaches a downward part of its business cycle, or simply sell the assets and move on?
• When will the benefits of running this business no longer fit into your overall life plan?  

If you make an early exit and die, (the extreme exit), what will happen to the business and those who are left?  How can the risks to others, (employees, bank, suppliers, investors), be minimized?

The whole concept of an exit strategy has been more than validated as I reflect upon my southern assignment.  Exit strategies were realized in Mississippi, for example, in just a few short hours, when people lost buildings, customers, equipment, paperwork, and years of hard work and dreams.

So, what’s the moral of the story?  Think about the conditions that would cause you to not want or be able to be in business anymore, and have a plan in place for making a graceful exit.

Chris Wendel is a Regional Director of the Michigan Small Business & Technology Development Center, in conjunction with the Traverse City Area Chamber of Commerce.