2007 August
Published August 28th, 2007
When a small business can establish relationships with vendors, lenders and subcontractors well in advance of when they are needed, it can avoid mistakes and save money. Planning all stages of development in advance is always a winning strategy.
Starting the search early provides the luxury of time: time to accurately determine the services and supplies needed; time to shop around for the firm or individual that provides the best fit with company needs; time to compare prices; time to negotiate terms; and time to weigh options and gather the most information possible before making a decision. On the other hand, waiting until the last minute to begin the search minimizes all of these advantages.
Starting the search before needs arrive requires planning. Because every growing business eventually will need to establish ongoing relations with vendors, lenders, etc., management should create a list of projected needs in these areas, well before those needs exist. You can then make initial contacts, interviewing candidates in depth. Based on the interviews, lenders and outside contractors can be selected, so that immediate action can be taken when actual needs arise.
A well-designed business plan should include projected future needs for vendors and lenders. (Future need for subcontractors often is more difficult to determine.) Using the business plan as the basis, the need for vendors and lenders could include the following criteria:
Vendors/subcontractors
1. Projections for growth of existing operations/production in terms of supplies and outside services required. This should include timelines for revenue growth, employee growth and quantity of output.
2. Projections for new operations/production, including projected revenue, required employees and output.
3. Establishing relations with local and nationwide temporary staffing agencies.
Lenders
1. Projecting financing needs, specific uses of funds and dates for funding.
2. Working with lenders while setting up new or expanded operations, so they will be part of the project rather than outsiders.
3. Setting up immediate lines of credit to establish creditworthiness and to cover initial set-up expenses of new or expanded operations.
An ideal scenario for setting up vendors/subcontractors and lenders in advance might go something like this: You approach your lender months in advance with detailed plans for your new or expanded operations. These include (just as in your business plan) why you need the funds, projections for revenue growth, how you will use the funds, when you will need the funds, and how you will repay. This is a scenario lenders love because it involves them in every step of the operations they are funding. In addition, this advance time allows you to contact potential vendors and subcontractors to determine needs and negotiate terms, making these terms part of the loan package.
Article used with permission from the National Federation of Independent Business. NFIB is the leading advocacy organization representing small and independent businesses. A nonprofit, nonpartisan organization founded in 1943, NFIB represents the consensus views of its members in Washington, D.C., and all 50 state capitals. Visit www.NFIB.com to learn more.
Tags: business plan, lenders, NFIB.com, Starting a Business, startups, subcontractors, vendors
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Published August 28th, 2007
Q: I made a presentation recently that was a complete disaster because I missed an important fact when I did my research. This could have been a big account. There’s not much I can do now, so I guess I am just giving others a warning: Do your homework!
Mark
A: When I was in my 20s and floundering around, I became inspired by the life of Buckminster Fuller. For the few today who know anything at all about the man who was once on the cover of Time Magazine (1964), it is usually that he was the inventor of the geodesic dome. You see it still here and there - those triangular playground climbing structures, as tops of buildings, as homes, and as buildings themselves.
What most people don’t know is that for the first 32 years of Bucky’s life, he was a complete failure, flunking out of Harvard twice (the second time was my favorite - he spent his entire semester’s tuition on a night out in New York with nine showgirls!), failing at several businesses, and so on.
He turned everything around once he realized that his mistakes were his greatest asset.
If he could learn from his mistakes, he theorized, and help as many people as possible in the process, he just might become a success. He decided to make his life an experiment, to see what one man could do to improve the world by learning from his mistakes. In the end he became a scientist, architect, mathematician, poet, author, inventor…in fact, he had the longest entry ever in the history of Who’s Who.
Maybe most amazing is that soon after Bucky died in 1985, this geodesic design he built with was discovered to be one of the basic building blocks of the universe. Therefore, this triangular subatomic molecule was dubbed the Buckminsterfullerene, or Buckyball.
Bucky used to say that he had made more mistakes than anyone he had ever met, that in fact, he was "the planet’s most successful failure."
Bless your mistakes. Take a chance and nosedive. Yes, of course you will get a bloody nose on occasion, but is that not the essence of what it means to be an entrepreneur? A person willing to take a risk with money to make money.
I suggest that it is the risk that is the juice that revs your engine. When it pays off, it is the best, but even when it does not, there is great value. Thomas Edison once said, "Of the 200 light bulbs that didn’t work, every failure told me something that I was able to incorporate into the next attempt."
Consider these "failures":
* Bill Gates: His first business, with buddy Paul Allen, was called Traf-O-Data. It analyzed traffic flow, and failed.
* Henry Ford: His Detroit Automobile Company went bankrupt, and the Henry Ford Company went out of business. He thereafter started Ford Motor Company at age 40.
* Abraham Lincoln: After losing his first bid for office - a seat in the Illinois House of Representatives - Lincoln opened a general store, but his partner soon misused business funds and the venture quickly failed.
The correlation to your willingness to take a risk and make a mistake is that, for the experience to be beneficial, you have to be willing to be wrong. There is little value in mistake-making if you don’t soon realize what part you played in the venture.
When you admit you were wrong, you can make a course correction. When you admit you were wrong, you can learn something new. When you admit you were wrong, you can figure out how to do it right. But if you insist you were right, you may be doomed to repeat your mistake.
Making a mistake and the willingness to be wrong: Two of the best friends your business can have.
Today’s Tip: Consider this career: After failing in business and having the love of his life die, this man had a nervous breakdown, was elected to the state legislature, lost his bid to be Speaker, lost his bid for Congress, was elected to Congress only to be defeated the next term, lost his bid for the Senate (twice!), lost an election for vice-president, before finally being elected president. Yep, Abraham Lincoln.
Steven D. Strauss is one of the world’s leading small business experts. His latest book is the Small Business Bible. A lawyer, author, and public speaker, Steve has spoken around the world about entrepreneurship, including at the United Nations, and he has been on CNN, CNBC, MSNBC, The O’Reilly Factor, and many other television and radio shows. If you would like Steve to speak to your group, help your business grow, or if you would like to sign up for his free newsletter, "Small Business Success Secrets!" please visit his website - www.MrAllBiz.com .
Tags: advice, expert advice, MrAllBiz.com, Steve Strauss, tips
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Published August 21st, 2007
Make More When You Cut Out the Middle Man!
There’s plenty of drop-shippers for eBay sellers out there; but they charge a subscription fee and/or increase the cost of the products to make money. How do you cut out the middle man to pay the least amount possible for profitable products to sell on eBay?
If you’re willing to do a little leg work, you can dramatically increase the profits you make. You’ll learn which two sources of in-demand products even many Power Sellers don’t think of. Read on and you’ll learn how.
Go Right to the Source
For the lowest prices on products to sell on eBay, it’s often best to go right to the source, the product manufacturer itself. So where will you find how to contact the maker of products?
As obvious as it might sound, visit a local retailer which sells the product you’re interested in. Take a pencil and paper. On the side of the product packaging, you’ll often see an address for the manufacturer or distribution center. Inquire by phone or mail.
If you don’t know who sells your product locally, where else can you find the manufacturer?
Head to the library. Tell the librarian you want to look up products by manufacturer. You’ll find two or three sets of reference books that’ll give you all the help you need.
You can also do a quick search on Google.com to find this information. Any company of any size is going to have a Web site. Look for an "About Us" or similar link on their home page. They’re very happy to sell more products. They’ll be happy to help you.
There’s one downside. Working directly with the manufacturer or distributor, sometimes you have to buy more than one or two at a time. Also, make sure who pays postage. Take that expense into account when determining how profitable working directly with the manufacturer will be for you. But it’s probably still a lot cheaper than getting the item from a drop-shipper.
The Product Source Close to You
Most every retail store shares a common problem. They have some items which don’t sell. I’ll bet you’ve set foot in a retail store and found an incredible price on a clearance item. Why did they cut the price so much? It didn’t sell.
Often retailers will actually sell items on clearance at a loss. In other words, they sell it for less than they paid themselves.
What’s more, many stores simply don’t want to clear these items out. For example, when a shoe store sells you a pair of Nike’s at deep discount, what does that do to their profit? Sure, they reduced their inventory, but at what price?
Retail Economy 101
Most likely, buying the inexpensive pair of Nike’s meant you DIDN’T buy a more expensive pair. If you came in to buy shoes, you probably expected to pay full price. Let’s say the retail store marks their inventory up 150%. A $125 pair of Nike shoes cost them $50. They make $75 profit.
Let’s say the retail store decides to unload the shoes at a loss. They sell you the shoes for $40 and take a $10 loss (since they paid $50 for them).
If they hadn’t offered the deep discount, you may have bought the $150 pair of shoes next to the discounted ones. They would have made $75 if you hadn’t bought the discounted pair. Did they win?
In this example, the store would have been better off pouring gasoline over and burning the pair of shoes you bought, rather than offering them at discount. Why?
If they had thrown out the pair of shoes that wouldn’t sell, they lost the $50 they paid for the shoes. However, they would have sold you the $150 shoes for $75 in profit. They still would have made $25 by throwing out the shoes.
By selling the shoes at discount, they recovered $40 of the $50 they paid for the shoes. But in doing so, they walked away from $75 in profit!
Give Retailers a Third Option
So what’s a retailer to do? Find another way to sell off their inventory that doesn’t sell. That’s where you come in.
You offer to sell the shoes for them on eBay. The store owner sets them aside and you list them on eBay. Agree to buy the shoes from them IF they sell on eBay for the same $40 they would have closed them out for.
You both win. You can likely sell the shoes for $100 on eBay. That’s still $25 cheaper than retail. And you’ve probably been stunned to see many items sell for more than retail on eBay. I sure have.
If you sell the shoes for $100 on eBay, you make $60 on them. The store owner unloads inventory they don’t want, but they don’t risk a customer buying the cheaper pair instead of a more expensive pair.
But if the shoes don’t sell, you’re not out a dime because you only pay for the inventory IF the shoes sell on eBay. You don’t risk buying inventory that doesn’t sell.
It doesn’t matter whether a store sells toys or electronics. Within a mile or two of your home, you’ll likely find dozens or even hundreds of retailers with excess inventory. When you help them clear out their inventory you provide a service profitable to you and the retailer. You both win.
So why don’t they just sell their items on eBay themselves? For one, they don’t have the time. More importantly, they don’t have the tools and know-how to do it profitably. With a tool like HammerTap auction research tool you know what works. With a minute or two per item, you’ll know:
How likely is the product to sell? (Auction Success Rate)
How much is it likely to sell for? (Average Selling Price)
Which listing features make it more likely to sell for more on eBay? (bold, gallery picture, highlight, etc.)
Simply put, you’ll know how to sell the item on eBay and make money on it. The retailer won’t.
Selling the Idea to Vendors
Visit local retailers which carry products you’d like to sell on eBay. Ask the business owner if the store ever has inventory that doesn’t sell without discounting it. Ask if discounting products means customers may buy the product at discount, rather than buying a similar product at full price.
Now comes the close. Ask, "If I could show you a way to reduce inventory and never risk sacrificing a full-price sale, would this appeal to you?" Here’s a sales tip. Never say "would you be interested?"
People are conditioned to say no to that phrase, because it implies that they are committing to something. But asking if something appeals to them is very easy to say yes to.
Tags: E-Commerce and E-Business, ebay, ebay sellers, HammerTap, Product Sourcing, profitable products, source, steve nye
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Published August 21st, 2007
Making sure you have the funds you need to start or grow your business is one of the most important things you can do as a small-business owner. Unfortunately, many loan seekers don’t do the preparatory work necessary for getting a "yes" on the loan application.
Step 1: Write your business plan. Whether you’re seeking commercial financing or a loan from an angel investor, you must be clear about how much you want, what you want the money for and how you plan to repay the loan. The answers to these questions should be spelled out in detail in your business plan. You don’t have to be a Hemingway to draft a business plan - use software or pre-formatted plans into which you simply plug your information (the writing is virtually done for you). For more information about writing a business plan, including links to commercial software, visit the SBA at www.sba.gov .
Step 2: Repair your personal credit if there are problems. Although your business is requesting the loan, your personal credit history is a key factor in whether a lender will approve your application. After all, in most cases, you must personally guarantee any loan to your business.
Contact each of the three major credit reporting bureaus to request a copy of your credit report (the same report that lenders will see). Under federal law, you’re entitled to a free copy annually.
*Equifax (www.equifax.com )
*Experian (www.experian.com )
*TransUnion (www.transunion.com )
Review all information to make sure everything is correct. If there are errors - such as old loans still being reported that you have satisfied or unpaid items that aren’t yours (they belong to the other Mr. Joe Smith) - you can have them corrected. Talk with the credit bureaus to find out what documentation is needed to update your files (it may be as simple as your writing a letter requesting the correction).
Idea: Build your business credit, separate and apart from your personal credit, to expand your borrowing opportunities.
Step 3: Fix your balance sheet. Yes, lenders do look at your balance sheet - the financial statement about your assets and liabilities as of a certain date.
You may need to pay off existing loans before the lender will consider your application for a new loan (i.e., you generally can’t pay off your current debt with a new loan).
Step 4: Find the right lender. Save yourself time and energy by submitting your application to the lender with which you stand the best chance of approval - a lender that aggressively supports small-business lending activities. It may be a commercial bank, a line of credit through a credit card company, or a private lender.
Important: If you’re looking for seed money to start a business, choose carefully since many lenders only deal with companies that have been in business for at least several years.
Ask around - for example, consult other small-business owners and your accountant - to learn which lenders are currently giving loans to businesses like yours.
Step 5: Put it all together. You’re ready to ask for a loan and you’ve found the right potential lender to talk to. Now you must complete the loan application. This entails more than filling in the blanks. You usually need to assemble:
*Financial information-balance sheets for yourself and the business, profit and loss statements, cash flow statements, and other numbers that the lender requests. For numbers on the projection of business activities, make monthly and quarterly forecasts for the coming year and quarterly and annual forecasts for subsequent years.
*Old tax returns, both business and personal - generally for each of the preceding three years.
*Other documents - leases, franchise agreements (if the business is a franchise), patents and other proprietary items, letters of intent from suppliers and manufacturers and any testimonials or scientific studies supporting your product or services.
Idea: Make a final check of your application package. It may be advisable to have your accountant or another numbers person review your application to help you present yourself in the best possible light.
Big Ideas for Small Business is a free monthly online newsletter from Barbara Weltman, author of The Complete Idiot’s Guide to Starting a Home-Based Business, Third Edition, and The Rational Guide to Building Small Business Credit. www.barbaraweltman.com
Tags: Accounting, Barbara Weltman, Finance, Finance and Accounting, loans, small business loans, Starting a Business, startups
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Published August 21st, 2007
Q: Normally I take customer complaints in stride, but I recently received a complaint that I thought was fairly ridiculous and basically told the customer so. Boy is this a different era! Instead of telling one or two people that he thought I was a jerk, he posted it online and now people are blogging negatively about me and my business. How can I avoid this in the future without always rolling over?
Steve
A: You make a really good point, and I feel your pain, brother! The fact is, for all of us, in this era of increased transparency and viral networking, the stakes have been raised.
Today, between personal websites, the so-called blogosphere, chat boards, instant polls, insta-feedback, and so on, ideas travel seemingly at the speed of light. This is especially true when it comes to problems with, and complaints about, your business. Acting like an analogue player in this digital world is a mistake that can kill your business.
It is indeed true that in the PI era (Pre-Internet), reputations and brands were created far more slowly, and unless yours was a national business or product that got resulting national coverage, it was far more difficult to change people’s impressions of you one way or the other (tainted Tylenol for example). Today if you blow it, it’s not a handful of people who will hear about it, but one or two hundred, or thousand, or…
Yep, the stakes have been raised.
But the reason to handle customer complaints well goes far beyond being slammed in someone’s blog. Consider just the financial impact of a single complaint.
I have heard and read many times that for every one complaint about your business, there are six other customers who are equally unhappy, but who just did not complain. So that is seven unhappy people in total. And, according to a study by Technical Assistance Research Programs, Inc. (TARP), customers with negative experiences of your business likely to tell twice as people than those with positive experiences. Indeed, it is estimated that the average disappointed customer tells 9 or 10 people about their bad experience (Note: This represents actual, real-world "gossiping", not online postings). 7 unhappy campers times 9 told friends equals 63 people who will have a negative impression of your business.
How many of those 63 will not patronize your business? A conservative estimate is at least 25%, but probably much more. If your product costs, say, $100, then that single complaint equals at least $1,500 in lost revenue (25% of 63 people is 15, times $100 equals $1,500.) What does that number equal if the complaint is spread online? Your guess is as good as mine, but it isn’t pretty.
The good news here is that plenty can be done to fend-off the real and virtual geometric unhappiness:
Deal with it: It is also said that of those who do lodge a complaint, fully 70% will do business with you again if you resolve the complaint satisfactorily, and that number jumps to 95% if the happy resolution is prompt.
Make the customer happy: No, I am not a believer in the "the customer is always right" school, because they are not. However, when it comes to complaints, I’m all about extreme customer service. To the extent you can, resolve the matter in the way the customer wants. Not only is this often the right thing to do (after all, people do not normally complain without reason), but it will also prevent the viral negative chain reaction from igniting.
Have a "no tolerance" policy: Employees who give poor customer service should be gone, period.
Make sure it is not systemic: The same complaint again and again is a warning sign that you have something amiss.
Finally, one way to avoid complaints altogether is to get customer feedback as often as possible. Honest critiques from people who like your business are invaluable.
Today’s tip: Someone once told me that the best piece of business advice he ever received was, "ask them what they want, then give them what they want." In this time when virtual complaints have such potential power, that may be the best policy of them all.
Remember: 95% of unhappy customers will do business with you again if their problems are solved quickly and satisfactorily. The best way to do that is ask them what they want, and then give them what they want.
Steven D. Strauss is one of the world’s leading small business experts. His latest book is the Small Business Bible. A lawyer, author, and public speaker, Steve has spoken around the world about entrepreneurship, including at the United Nations, and he has been on CNN, CNBC, MSNBC, The O’Reilly Factor, and many other television and radio shows. If you would like Steve to speak to your group, help your business grow, or if you would like to sign up for his free newsletter, "Small Business Success Secrets!" please visit his website - www.MrAllBiz.com .
Tags: customer service, expert advice, Generating More Sales, MrAllBiz.com, Sales, small business expert, Steve Strauss
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Published August 14th, 2007
The growth of the Internet as a sales and distribution channel over the past decade has led to the unprecedented proliferation of fake or counterfeit merchandise. At the same time, technology has improved manufacturing capabilities around the globe to unparalleled standards to the point where "fake" is no longer synonymous with "poor quality" - everything looks the same now.
Furthermore, as venues such as eBay and Yahoo Stores attempt to arrest the growth of counterfeits from taking over their sites, it is becoming increasingly important for wholesalers and small resellers to take necessary steps to protect themselves from getting duped into purchasing fakes.
Why? Because, quite simply, it is illegal to sell counterfeit merchandise. And as a seller, ignorance is no excuse. It is your duty to know the provenance of the merchandise that you resell for capital gain. Furthermore, you need to be able to demonstrate that you have taken the proper steps to purchase authentic merchandise.
So, how can you protect yourself as a buyer of goods? If challenged by a brand, or a third party venue, how can you demonstrate good intent on your part, and avoid serious legal repercussions (and, you can be certain, if you are selling fakes, it will catch up with you one day)?
Fortunately, there are a number of steps that you can take to protect yourself and avoid at least 95% of the scams that are out there.
Here are 10 Golden Rules that you should scrupulously follow when purchasing trademarked and branded merchandise from third party vendors:
Rule 1 - Use your common sense!! If a deal is too good to be true, you can be sure that it is not true. For instance, Louis Vuitton(TM) does not have sales and burns all its surplus, so basically if someone is selling new Louis Vuitton(TM) merchandise, it is fake - and that probably means everything else they are selling is fake too!! Prada(TM) handbags do not sell for $50, period. Got it?
Rule 2 - Know your brands. If you are selling a brand, please do your due diligence on it - research it before you sell it. This is easy to do and will save you a lot of problems later. For instance, authentic Chanel(TM) sunglasses are very, very hard to purchase in the excess market, over 90% of them are fake. This is easy to learn. Chanel(TM) is a brand that is licensed to Luxottica(TM), the largest manufacturer of designer sunglasses in the world. And they also own Sunglass Hut(TM) retail stores. So they do not need to sell their surplus sunglasses, they keep them in-house - and thus, it is very hard to get them. This is different from Gucci(TM) and Christian Dior(TM) sunglasses. These are made under license to Safilo(TM). Safilo(TM) does not have its own retail distribution, so it outsources its surplus inventory and, thus, it is easier to find them in the surplus market (which does not mean that all Gucci’s(TM) are real, of course!!).
Rule 3 - Quality Control. This is the rule that most people do apply, but it is a lot harder than people realize to spot a fake. Sometimes, there are just cheap knock offs, and these are easy to spot. However, many fakes are actually exactly the same as the real thing. So, when inspecting merchandise, do you know what to look for? The best way is to go and buy one of the real ones from an authorized store (you can always return it later). If you cannot do this, then check two samples side by side. Count the stitches - the stitch count should always be the same. Check the labels - the content, font, positioning. Smell the merchandise, silly as it may sound. Measure it. And know your brands - every brand adopts certain anti-counterfeiting measures, so try to search online and find out what these are. And, finally, if you are investing a lot of money, there are specialist laboratories that will do a full spectrum of tests for you. Oh, and one thing - pay for a sample if you have to. Better to lose a little than a lot!!
Rule 4 - Pricing. The price that you are being asked to pay for a piece of merchandise tells you a lot about the merchandise. Much of this is the application of Rule 1 - common sense. For instance, if you search on eBay, you will see a lot of listings for black Prada(TM) micro fiber MV515 handbags. They retail for $236. They are on eBay for as little as $50. Most importantly, they retail for 136 Euros in Italy. So do the math: These bags are part of every season’s collection, with minor modifications each season, so they are never heavily discounted. Best price you will pay in Italy is 50% of retail, plus you can get your Value Added Tax back upon export (20% in Italy). So that is 56.66 Euros. The current exchange rate is $1.35 to 1.00 Euro. So that is $76.49. Then you have to import them (shipping costs, say 5%) and pay US Customs duties, which are 19% for synthetic material handbags. Now the landed cost is $95. And the seller has to make a profit for their efforts. So, basically, unless it is fake, are you really going to find an authentic MV515 handbag for less than $110?? No - and apply the same pricing analysis to all your purchases. Understand and be familiar with the normal surplus price for different product categories that you specialize in.
Rule 5 - Know who you are buying from. You have to know who you are buying from. The best is to always visit their warehouse/showroom and get to know them. If you cannot do this, then it is essential to only deal with vendors that:
- Have a US domiciled business
(are a legally incorporated company within your jurisdiction - whether it be the US or any other Country) such as a Corporation or an LLC.
- Have a US address, together with contact details - phone, fax, email address
(non-free), website, etc. The more the better.
- Have a trusted and good reputation within your merchandise category. Check them out, or verify third party references.
You really want to avoid purchasing trademarked/branded goods altogether from vendors that do not meet these strict criteria - unless you are buying the goods yourself overseas. You have absolutely no recourse if you have any problems. You are just exposing yourself to be extorted. If a trademark owner comes after you, how are you going to catch up with your supplier? You do not know where they live or how to find them. Are you really going to sue a supplier through the Italian Law courts? No, did not think so.
Rule 6 - Chain of Title. Everyone always asked for the so-called "Sanitized Invoice". Frankly, these are generally not worth the paper that they are written on unless they form part of the "chain of title". The chain of title is the trail of invoices from the original trademark owner, or authorized third party seller, to you, the buyer. This is what a trademark owner is going to look for when they come after you - that you form a link in the appropriate chain of title, and that you have the paperwork to back that up. A sanitized invoice on its own does not give you this at all. In fact, you can go online, or to a street corner in Italy, and buy lots of "sanitized invoices" - they are all useless. You need to be in the chain of title. What this means is that, having adhered to Rule 6 above, you get an invoice from your supplier. That invoice must specify exactly what you purchased including the brand name written out in full, and the style number of the items that you purchased. In addition, the invoice must specify that the goods that you are purchasing are guaranteed to be authentic. This invoice is much more valuable to you and will protect you far more than a sanitized invoice. Of course, if you are buying a large volume of merchandise, you should also ask to inspect or receive copies of the suppliers own invoices with its suppliers. Many suppliers are reluctant to provide these as the do not want to divulge their sources, and this is understandable. Furthermore, you can then reuse these invoices time and again outside of the control of your supplier to protect your own sale of counterfeit merchandise (a practice known as "mixing"). Accordingly, many genuine suppliers are very wary to provide original supplier invoices. And, as long as you have fully applied Rule 6 above, and have the invoice in hand as specified here in Rule 6, you are generally going to be OK.
Rule 7 - Know the US Customs & Import Laws. You must research and understand the US Parallel Import laws. It is completely within your rights to import authentic merchandise from non-US domiciled brands and resell them, within certain limitations. However, it is not permitted to import US domiciled brands, such as Ralph Lauren(TM) and Tommy Hilfiger(TM), into the US without the permission of the respective brands. So know the rules up front and avoid obvious mistakes and pitfalls.
Rule 8 - Start Small and Insist on Returns. When you are starting out with a new supplier, always start small. Do not be bullied into a large order. That in itself is a red flag. Furthermore, insist on your ability to return the merchandise if you are not happy with it. After all, this is your right. Again, another red flag if the supplier does not accept returns.
Rule 9 - Pay with a credit card. Credit card payments protect you, they are always better than cash or bank wire transfers, until you get to know a supplier and your orders grow in size. If you use a credit card for payment, keep records, and you can always file a chargeback.
Rule 10 - Use your Common Sense!!! Yes, that again. And again.
If you apply these 10 simple rules, you are not going to avoid every scam, but you are going to avoid 95% of them, and while you are at it, you are also protecting yourself from any legal liability. Good luck out there!
Tags: advice, fakes, James McHugo, Luzury Magazzino, Product Sourcing, source, spotting fakes, tips, vendors, wholesale
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Published August 14th, 2007
Getting started
1. Not setting up your business entity correctly.
From a legal and tax standpoint, there are various ways in which you can set up your business, including as a sole proprietorship, partnership, limited liability company (LLC) (or for professionals, limited liability partnership, or LLP), S corporation or C corporation. The type of entity you select will affect:
*Exposure to (or protection from) personal liability. Owners who are sole proprietors or general partners in a partnership have no protection from personal liability; if the business is sued, you risk losing not only the business but also your home and other personal assets.
*Taxation. The income tax rate paid on your profits depends on how your business is organized. The more you have to pay, the less you have to reinvest in the business to see it grow. If the business is a pass-through entity where you’re taxed on your share of the profits - such as a sole proprietorship, partnership, LLC or S corporation - the rate you pay is based on your overall personal income (including your share of business profits). In 2007 you can pay up to 35% on your business income. In comparison, C corporations are separate taxpayers with a top tax rate of 35%, which applies only to very large corporations (although personal service corporations, including professional corporations, pay a flat 35% rate), but smaller C corporations may pay only 15% or 25% on their income.
*Audit risk. While size matters (e.g., very large and very small companies on an asset or gross receipts basis are more likely to be audited), the type of business entity you own also affects your audit risk. Sole proprietors, for example, are more likely to be audited than owners who have incorporated. Audits can result in assessments of back taxes, interest and penalties that can cripple a business.
2. Not raising enough capital to sustain you. The lack of money - from investors, lenders or your own resources - is, perhaps, the number one reason why businesses fail. Make sure you have enough capital on hand to carry you through the start-up phase or difficult periods in the life of your business.
Idea: Arrange for lines of credit when your company is doing well so the money will be there in times of need. Establish business credit and get your own credit history in shape to make it easier for your business to borrow money.
3. Not writing a business plan.
Even if you’re not Shakespeare, you have to make a blue print for your business detailing what you plan to do and how you plan to accomplish it. A business plan is a necessity if you need to borrow money or raise capital from investors. For assistance on how to write a business plan, visit the Small Business Administration at www.sba.gov.
Operations
4. Not correctly setting your prices.
The price you set for your goods or services must be sufficient to generate a profit; getting sales isn’t enough if you’re actually losing money on each sale. In order to determine your prices, you need to know how much it costs you to sell.
Idea: Raise the price of your goods or services to keep pace with changes in your overhead and other costs (e.g., higher energy costs and interest rates). Don’t be afraid that higher prices will drive business away. Of course, keep a close eye on your competitors so that you don�t price yourself out of the market.
5. Relying too heavily on one customer. Cervantes was correct about not putting all your eggs in one basket - doing so is just too risky. A major customer or client may demand the bulk of your time and attention and pay you handsomely. But don’t ignore the need to continually broaden your customer base so that you’re not left high and dry if the big customer cuts back on its demand or leaves you.
6. Not monitoring your inventory.
Two aspects of inventory management can doom you - buying too much so that you overextend your capital or buying too little so that you can’t meet customer demand and you lose the sale.
Idea: Keep track of inventory, using computer records or other methods to ensure that your count is correct. Take a physical inventory periodically to verify your numbers (and to make sure there has been no employee theft).
Cash flow
7. Not monitoring cash flow.
Understanding your cash flow cycle - the period from buying the material, to making the products or buying them from suppliers, to selling the products and, finally, receiving payment - is critical to the survival of your business. You need to have the money on hand to pay for materials or inventory items before you make the sale and collect the payment.
Idea: Stay on top of your accounts receivable - an important part of your cash flow cycle. The failure to promptly collect outstanding receivables can mean you’ll never collect them at all; the older they become, the smaller your chances of recovery.
Marketing
8. Not marketing your goods and services every day in every way.
Whatever your type of business - from selling a cup of coffee to consulting on nuclear energy projects - take every opportunity to sell yourself.
Idea: Hand out business cards wherever you go. Join local chamber of commerce or other organizations to network with others in your community. Use online business communities to network on the Web.
Strategic planning
9. Not having an emergency plan.
Things happen and you need to be prepared. Storms, illness, electrical outages, or acts of terrorism can disrupt your operations. Put backup plans in place so you can keep going. Carry business interruption insurance to pay bills even if the business is temporarily shut down.
10. Not having a succession plan.
What happens to your business if something happens to you? If you’re the heart and soul of the company, your retirement, incapacity, or death could spell the end of the business. But plans can be made to successfully carry the company through a transition into a new era following your departure.
Idea: Assemble a team of experts - at least a banker, accountant and attorney - to work with you in every phase of your business.
Big Ideas for Small Business(R) is a free monthly online newsletter from Barbara Weltman, author of The Complete Idiot’s Guide to Starting a Home-Based Business, Third Edition, and The Complete Idiot’s Guide to Starting an eBay Business. www.barbaraweltman.com
Tags: advice, Barbara Weltman, Big Ideas for Small Business, expert advice, Starting a Business, startups, tips
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Published August 14th, 2007
Q: I know that the federal minimum wage is set to go up soon, but does it apply to me? I have three employees. Is there anything else I should know about the minimum wage?
Jesse
A: You are right that the minimum wage is due to increase. The schedule for the increase is as follows:
- July 24, 2007: from $5.15 an hour to $5.85 per hour
- July 24, 2008: From $5.85 to $6.55
July 24, 2009: From $6.55 to $7.25
Does the increase apply to your business? Well, it depends.
First it depends upon what state you are in. Because it has been a decade since the federal minimum wage was last increased, many states have since passed minimum wage law increases that exceed the federal standard. For example, in California, the minimum wage is $7.50 an hour. In Washington D.C. it is $7.00. When your state’s minimum wage is higher than that of the feds, you must go with your state’s law. Therefore, if your state has a higher minimum wage than $5.85 an hour, the increase in the federal minimum wage does not affect you. (You can find out what your state’s minimum wage rules are here .)
Conversely, if your state has a minimum wage equal to the federal minimum wage (such as Texas, Kentucky, or North Dakota for instance) then the federal wage increase potentially applies to your business and your employees.
If that is the case, then the next consideration is whether your business is the type to which the minimum wage applies. According to the Department of Labor, "The minimum wage law applies to employees of enterprises that do at least $500,000 in business a year. It also applies to employees of smaller firms if the employees are engaged in interstate commerce or in the production of goods for commerce."
Next, to see whether the increase is applicable to you, you have to determine if your employees are the type to which the minimum wage applies or whether they would be considered "exempt".
Exemptions are as follows:
- Salaried executives and managers who make not less than $455 a week.
- Administrative employees doing non-manual work who make at least that same amount.
- Professionals with advanced knowledge making that same amount.
- Creative professionals who use imagination and creativity, and who make at least that $455 figure.
- Computer professionals making that amount of money.
The minimum wage rules are also a bit different for younger employees. Workers under the age of 20 must get at least $4.25 an hour for the first 90 consecutive days of employment. After that, they are due the minimum wage. Similarly, full-time students who work in retail or service stores, agriculture, or colleges must earn at least 85% of the minimum wage.
Finally, special note needs to be taken with employees who receive tips. The federal rule is that a tipped employee is only required to receive $2.13 an hour in wages if the amount of tips received, in addition to their base pay, at least matches the federal minimum wage and the employee retains all tips and that amount is at least $30 a month. If the employee’s tips and the employer $2.13 an hour do not equal the new minimum wage, the employer must make up the difference.
Note again that many states have specific rules for tipped employees, and if the state law mandates a higher payment, that state law trumps the federal one.
For more information, you can visit this site .
Today’s Tip: Do we need this minimum wage increase? I say we sure do. A full-time worker making $5.15 an hour earns $10,712 a year. The federal poverty line is $17,170. Even when you add in programs such as food stamps, that figure is well below the poverty line. The good news is that an increase to $7.25 an hour by 2009, along with food stamps etc., raises the figure to $19,796, which would be 15% above the national poverty line (figures courtesy of the Economic Policy Institute.)
Steven D. Strauss is one of the world’s leading small business experts. His latest book is the Small Business Bible. A lawyer, author, and public speaker, Steve has spoken around the world about entrepreneurship, including at the United Nations, and he has been on CNN, CNBC, MSNBC, The O’Reilly Factor, and many other television and radio shows. If you would like Steve to speak to your group, help your business grow, or if you would like to sign up for his free newsletter, "Small Business Success Secrets!" please visit his website - www.MrAllBiz.com .
Tags: expert advice, hiring, Hiring and Human Resources, human resources, minimum wage, MrAllBiz.com, small business expert, Steve Strauss
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Published August 7th, 2007
Locating products is a prerequisite for those who want to make money on eBay. It is also where the real fun begins. At times locating products can be like looking for a needle in a haystack. That is especially true when trying to add "hot" products to your offerings. It is possible to locate almost anything, but for the "hottest" products, the price that will be required will mean little or no profit.
Start by examining your main suppliers. Look at a set of criteria similar to this:
- Products Must be in Your Core Sales Areas
- Product Quality is as Represented
- Customer Service Must be Outstanding
- Products must be in our core sales areas - for a supplier to be on your list, they should handle products that are within your core sales areas. To make money on eBay, every supplier must be able to support your core business area, with other "great deals" as a bonus. Purchase and then pass those "great deals" onto your customers.
- Product quality is as represented - this is really about trust. You must be able to trust your suppliers. When they say that a particular product is a certain way that is exactly what you expect to see when the product arrives. When they recommend a product that you are unfamiliar with, you need to be able to count on that recommendation to be true. If you cannot trust your suppliers, eliminate them from your list.
- Customer service must be outstanding - you should expect nothing less than outstanding customer service from your suppliers. This includes prompt replies to questions, quick turnaround on purchases, and notification of "hot deals" when they become available from the supplier.
- Reasonable prices - most eBay businesses are on a very tight profit margin. You need to count on your suppliers to provide the lowest possible pricing on their products. If there are ways to reduce prices, you need to know. The less you spend on products, the better the pricing for your customers! Everyone wins with this approach.
- Prompt delivery - you should look for two things in delivery. The first is pricing. As fuel prices increase, freight becomes a bigger and bigger part of the overall cost of merchandise. Look to your suppliers to do everything possible to keep freight costs down.
(We have also started working with another businesses to coordinate shipments, for example. By combining our freight, we can typically obtain lower freight costs.) The other piece of the freight equation is speed of delivery. Once you’ve paid for the merchandise, it is money that you need to turn around to invest in new merchandise as soon as possible. You cannot make money on eBay if you pay for freight and then have products just sitting in someone’s warehouse. To that end, expect your suppliers to ship immediately upon receipt of payment. Be sure to track your incoming shipments to ensure delays are minimized.
The list actually looks much like the list that eBay buyers use when they decide whether to bid on products, and then whether to give positive feedback or not.
In addition to your good old standby suppliers, develop a back-up list of second-tier suppliers. These suppliers are either recommended by someone you trust, or that you have found at tradeshows, in newsletters, or through some other means. Possibly you have completed only one or two transactions, but some issue kept them from making your main supplier list. Look to these second-tier suppliers for products when your main suppliers cannot help with a specific product that will make money on eBay.
As a part of the process, ask each supplier that cannot furnish a desired product to recommend another source. While this rarely meets with success, there will be times when you hit a homerun using this approach.
If your main suppliers and second-tier suppliers are unable to provide a product, conduct an internet search. When you reach this point, know that you are going to be investing a lot of time not only looking for the right supplier, but also in investigation of prospects.
Before we ever deal with a new supplier make sure that the supplier can provide the desired product. Work to determine a price. If all is looking positive, ask for references before you buy. Only after checking references should you move forward with a purchase.
Always be very conservative with your first purchase from a new supplier. There are just too many unscrupulous sellers who provide inferior products, poor service, or have other issues. You will not make money on eBay with these problems.
Don’t forget that many who make money on eBay manufacture their own products. This is another great way to do something that you really enjoy for a profit!
To Your eBay Success!
(C) 2007 Bob Hamilton All Rights Reserved Helping people get started on eBay Visit http://www.onlineauctionsmadesimple.net for a Free Dropship Report!
Article Source: http://EzineArticles.com/
Tags: bob hamilton, ebay, ebay sellers, ezinearticles.com, onlineauctionsmadesimple.net, Product Sourcing, source
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Published August 7th, 2007
Social Retailing
Here’s a new term that retailers will soon learn! Bloomingdale’s is trying to reach out to teens and young adults, so in its flagship store in New York City, it offered an interactive sales-floor mirror that let shoppers view themselves in outfits as well as comments - and images of alternate garments - sent to the mirror by their online friends!
If the shopper liked the look of the dress suggested by a friend, she can touch the mirror to make the image of the dress appear life-size, and then stand in front of it which will allow her to "try it on" in virtual reality. This is now social retailing…web-based social networking in a traditional retail environment.
The product is called the "Magic Mirror" produced by IconNicholson and is expected to be rolled out to several retail stores later this year.
Web and Traditionals Not Connecting
A recent study of 100 of the fast-growing publicly held retailers in the United States shows that less than 25% consider seamless web-integration as a top priority. Of the retailers that were operating websites, over 40% didn’t have any integration between store and website and only two-thirds gave customers the ability to purchase a product on the site.
Many retailers have made some multi-channel progress including integrated return policies, gift card policies, pricing and promotions. It does appear that many of the retailers efforts to use internet marketing is disjointed from their brick and mortar stores.
This recent survey explains that in order to meet customer expectations, your channels and your brand must all work together seamlessly to afford the customers a rewarding shopping experience. This is something that is not being accomplished by most major retailers.
Retailing Tidbits
PERSONALLY I never liked Starbucks coffee, but I was surprised, considering their popularity, that blue ribbon for best coffee went to McDonald’s (which was also the cheapest). Perhaps this is why Starbucks has started selling CD’s and other merchandise.
…WAL-MART’s campaign to sell energy efficient light bulbs is to be applauded. However, typical of the giant, they formed a power company called Texas Retail Energy to supply electric to their stores. Perhaps they’ll start retailing it also - kilowatts in aisle seven!
…SMALL retailers take note: Skateboarding is STILL big! Kohl’s is planning a line of
clothing and JC Penney is teaming with Tony Hawk for a footwear line that they say will be the biggest brand launch ever. Follow the leaders!
…QVC officially shipped its 1 billionth package in the United States. They ship 12,000 packages an hour and 3.4 packages every second in the U.S.! Wow!!
Tags: Product Sourcing, retail, retail business, retail trends, shopping trends, source, tips, trends
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