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The 2001 Small-Business Survival Guide
While the particulars may change, the fundamentals
of business success remain the same
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Business New Haven
4/2/2001
By: BNH
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As small children, we all played the game "Let's Pretend." Perhaps we were owners of the local grocery store. We set up shop in a good location (say, the playroom), had our cash register, play money and shelves filled with items anyone would want to buy. It was grand fun.
That's because it never crossed our minds to worry about how successful we might be. We had a steady customer base (Mom, Dad, perhaps a sibling or two, a dog in search of a treat) and all the money we could draw (literally).
As adults, starting and keeping our own businesses can be just as rewarding. And a million times more scary.
There are countless issues that we need to know about to give us a fighting chance in today's economy. Whether you are jumping into your own business after years of contemplating the joys of working for yourself, or you are currently at the helm of an up-and-running small business, the following is an overview of the things you need to know to be as successful as you were as that six-year-old shopkeeper.
Out To Launch: The Business Plan
Whether you are baking dog biscuits or selling computer software, your basic business needs are surprisingly similar. The first step toward creating and maintaining any type of business is to develop and follow a business plan.
"This is what the banks are looking for," cautions Pete Rivera, director of the Connecticut Small Business Development Centers.
While plenty of people are willing to take the risk of opening their business, many find the undertaking of writing a business plan to be daunting. Nevertheless, "Every hour that you spend on your business plan is another day you'll be in business," Rivera notes.
"We hold a class here at the center every two weeks on how to start your own business for $15," says Rivera. "Or you can sit privately with a counselor at any time. We basically walk you through every step of the business plan - why it's important, what bankers are looking for. We even provide the materials for you to put it together."
Rivera says of the hundreds of businesses that get their start at his office alone (representing only a tiny fraction of the thousands launched each year in the state) most of them will fail - and fail rapidly.
"We can tie success to the business plan directly," Rivera says. "The more time you spend on it, the greater your success will be."
Rivera compares running a business without a business plan to "driving your car without the dashboard. You know the car is running," he laughs, "but you don't know where you're going."
Besides aiding in the development of the business plan, Rivera's office helps small-business owners in myriad other areas. The office houses the Service Corps of Retires Executives (SCORE), whose members meet with entrepreneurs and counsel them on business practices as well as offering an on-going support system. There are other free mentoring programs, as well, which any small-business owner should seriously consider enrolling in.
Where's the Money?
While play money was easy to come by, the real thing is another story.
Finding the capital to realize your dreams and sustain them is a challenge that demands significant homework. Finding the right lending institution for your needs may require several interviews with different organizations.
Some of the basics you'll need to provide your bank is a personal financial statement, including tax returns from the past three years, and a business plan that includes credible revenue projections and proof of expertise in the business. But don't let these forms overwhelm you before you even go through those revolving doors.
"A lot of people are afraid to even come into a bank," says Joyce Ragozzino, senior vice president of new business development for Castle Bank in Meriden. "They're afraid of rejection. But they shouldn't be.
"Even if I did reject you," Ragozzino adds, "I'd sit with you and tell you why and exactly what you need to do - what any bank would be looking for from you."
Ragozzino suggests meeting with a banker right off the bat - even if none of your paperwork is complete (loan application, business plan, etc.). That way, the loan officer can walk you through each step of the process before you begin it, making it much less intimidating.
"Some people don't really know how much they should be asking for," she says. "They may come in looking for $20,000, but after we sit and talk to them we realize they actually need $50,000. We can sit together as a team and figure it out.
"We can't really generalize what the process entails," Ragozzino adds. "It's very different for each business. It depends on the type of business. Is it seasonal? Is there equipment to buy? If you're a landscaper, for example, you might need an equipment loan to buy a tractor. Or you might need a loan for office furniture, fixtures and inventory. These are different loans, and each businesses has its own specific needs."
Don't rule out other sources as well. Some municipalities offer tax incentives and loans to local business owners as a way of developing local business. "The city of New Haven offers many such plans," says Rivera, "and most big cities do [to reverse the flight of businesses to the suburbs]. Those who live in smaller towns should find out what, if any, funds are available to them."
Ragozzino assures that loan officers are aware of these supplementary financing sources and will advise them where they apply.
Deep in the Heart of Taxes
One of your most valuable business resources will be your accountant. A certified CPA - select one with specific knowledge of the needs of small businesses - will be able to offer guidance in almost any need you encounter. In addition to filing your taxes, look to this person as a leader of your business team.
"You really have to surround yourself with a good team," says Nancy E. Oman, president of the Stone Agency in Guilford. "Find yourself a good attorney, a good lawyer, a good banker and a good accountant. Because this is a team that works together so often, you can get referrals for an accountant from your lawyer, or from your insurance agent," she says.
Rely on your accountant to assist you in any financial decisions your business faces - including employee benefits and any expansion you may be about to undertake. Establish a relationship and meet with your accountant at least three times a year so he or she is informed with the direction your company is heading in.
It's a good idea not to make any decisions about your business before checking in here first. Your accountant knows best how these decisions will affect overall the health and growth trajectory of your business.
Mastering Disaster
It was probably not very likely that a flood could hit the playroom, or that Mom would sue if she tripped and fell while shopping. But both of those scenarios and more could become central to protecting not only your business, but also the people who do business with you and those who work for you.
How can you be assured of the right amount of coverage?
"You need to interview insurance agents," counsels Oman. "Try to get referrals and make sure your agent specializes in business insurance.
"Don't go to a jack-of-all-trades," she adds, emphasizing that homeowners insurance and business insurance are very different.
"I am amazed sometimes when I look at some of the business policies that were written by agents that specialize in homeowner policies," Oman says.
Oman says the insurance professional is a key component of the business team that is indispensable when starting a business. "There is no sense starting a business on your own," she says. "These are professionals who will give you the counsel that you need."
Oman says it's especially important for bioscience and technology-based businesses to retain insurance professionals with proven expertise in their specific business arena. The agent must be able to demonstrate experience these areas in order to know what coverage to recommend.
"I see ourselves, the agents, as foreign language translators," explains Oman. "We have to understand the business, we have to understand the insurance needs, and then we have to translate this information to the underwriter. The underwriter has to have a comfort level with the customer. It's our job to provide that."
Oman describes an off-the-shelf insurance policy especially designed for small-business owners. This type of policy - which Oman recommends - contains the basic coverages most important to small businesses. Whatever addenda your particular business requires may be added on to your basic coverage.
Even so, setting up the plan tailored to your business' needs can take time.
"The whole thing is a real process," says Oman. "It can take months to put together the right package for you. Most people do not come in and buy their insurance in one day. It's important that people understand the process. As you talk with your agent, as more questions are asked, more coverage may need to be added.
"For instance," asks Oman, "are you going to hire employees? Will you own the vehicle [you drive] or will your company own it? Will you travel overseas? Insurance policies bought in the U.S. only cover you in the U.S. You need to add to your plan in order to be covered overseas," she says.
"People are buying insurance because a third party requires you to have it. If you are getting a loan from the bank," Oman says, "the bank will require insurance. It's also a Connecticut state law that you carry insurance on your business, [and] it's a law that you carry workers compensation insurance."
Finally, Oman has some practical advice on which to base your insurance needs:
"Buy what is mandatory first; then add onto your policy as your budget will allow."
It's the Law
Your lawyer may be the most important member of your business support team - whether you are starting a new business, purchasing an existing one, or make any changes to your existing business.
But how do you go about finding a good one?
"A good idea is to go to some of the businesses in town and ask them who their lawyer is," says Lars Schulze, an attorney at the law office of Nancy J. Vavra in Guilford. "Get a list of names and call other attorneys to see what they think of them. If someone showed me a list of lawyers and I saw two or three that I knew were particularly good, I could recommend them to you."
Schulze also recommends calling the New Haven County Bar Association referral service at (203-562-5750). There is a fee of $25 for referral.
"There are so many practical concerns you need to consider when you own a business," says Schulze. "How will you set it up? Will it be a professional corporation [PC], a limited liability [LLC], a sole proprietorship? Will you need to register your business with the Secretary of the State's office?
"There are pros and cons to each of these entities, and you need to be aware of them," says Schulze. "For instance, a sole proprietorship is easiest to set up, but is also the riskiest. You, the owner, are personally liable. If someone sues you, you could lose everything: your business, your car, your house - everything. Other entities limit liability: You may just lose your investment, not your shirt."
Your lawyer will help you to establish your place of business as well. Will you rent? Buy? Either way, you'll have either a lease or a property sales contract to negotiate, as well as a plethora of concerns. If you lease, what exactly are the responsibilities of you vs. the landlord?
For example, how much can you alter the property to serve your business needs? What about property damage? Where will your customers park? If you're buying a property, are there any easements existing on it? What is its zoning status?
Another major concern for business owners, obviously, is lawsuits.
"Business people deal with the public," says Schulze. "Sooner or later someone is going to complain, and you need to know what the law is. What if someone stops payment on a check, or slips and falls on your property? If someone gets hurt, there will be a lawsuit.
"There are so many industry-related laws to be aware of," adds Schulze. "If you open a grocery store, for example, there are freshness laws for produce. If you open a photo-finishing store, you must by law have proper disposal of the numerous chemicals involved."
Schulze says he conferences with business clients typically two to three times a year, or more often as particular needs arise.
"You really need to speak with your attorney before you jump into the lake," Schulze says. "Go over the major issues right away. What business will you do? Where? Will you buy, rent? Will you have employees?"
Once the guidelines are established, count on your attorney to navigate the lake by your side.
People Who Need People
No longer can business owners count on their little sisters to stock the shelves and ring out the customers. Finding employees that fulfill your needs is among the business owner's most challenging tasks.
Not only must you find people who can do the job; you must train them to share your philosophy about the business you operate and the way you operate it. Once you hire, train and invest in them. That's easier to say than do. It can be quite problematic if you realize that they don't agree with your business practices.
Arlene Mazzotta, principal of A.R. Mazzotta Employment Specialists, has been staffing employees for 29 years. She says the way to find business executives is still through the recruitment agencies commonly known as "head hunters." Mazzotta stresses the time-worn adage: "The time to get a job is when you already have a job."
"Executives who are already working are the ones you should be looking for," Mazzotta says. She cautions categorically against hiring managers out of work for more than two years.
"The only exception is someone who is making a career change," she adds. "These people throw themselves into their new field - leaving their old jobs before they've actually made the jump into it."
"The Internet is interesting," she adds, "although it can be an awful lot of work. You may be weeding through a lot of résumés that don't relate to your business. It can become quite time-consuming."
Mazzotta adds that networking via professional organizations and through organizations of presidents/CEOs is a great way to meet people face-to-face in a more relaxed setting, providing a valuable screening process.
For non-management employees, Mazzotta has other suggestions. "It does depend on what type of business you have," she says. "Students are great for retail businesses, especially in the summer. And if you can find a school with an administrative-assistant program, you can find some great office employees - though they may need some training."
Other options for full-time but lower than management-level employees are still the same: Advertise in area newspapers and in any trade publications relevant to your business, and use agencies that don't specialize in executive recruiting only if you can afford additional fees.
Don't overlook a more obvious option: Tell everyone you know you are looking for help, and what kind. Many of the best job placements happen by word of mouth. Get the word out there to as many acquaintances and associates as you can, and someone is bound to know someone else looking for a new position.
Once you've identified those candidates why warrant an interview, Mazzotta has some time-tested suggestions to help avoid hiring the wrong person.
"Be sure to take the time to get to know the person," she explains. "Ask them how they would solve a specific problem scenario - say, a problem with an employee. Does their answer relate to your business philosophy? Do you have the same objectives in mind?"
Still, most of those hiring today still rely on old standards such as résumés and references. But one can find out about a candidate's proclivities and business philosophies by calling former employers and asking specific questions that will yield direct answers as well as hear both sides of why a person left her or his last job.
Once you've assembled a team, Mazzotta stresses that the work hasn't ended. One of the most challenging tasks businessowners face is keeping talented employees.
"In addition to making sure your compensation package is competitive," she says, "surveys point out time and time again that there are many other factors that encourage your employees to remain part of your company."
Recognition, career-pathing and work atmosphere form a close second, Mazzotta explains. She also points out some concepts that put you ahead of the game in providing incentives, such as employee-wellness programs that include health-club memberships, employee-assistance programs including instructions on a variety of special-interest subjects or activities, and leadership-training programs, including volunteering for special interest community services.
Other creative suggestions for keeping employees content include coffee with the president, free lunch on Fridays, anonymous gripe boxes and company newsletters.
Mazzotta emphasizes that customer service begins at home.
"We're aware that our employees are the most important customers, and treat them as valued clients - because they are," she says. "Sharing problems and coming up with solutions together is the first step in building loyalty."
Mazzotta cautions against overlooking the importance of employee-retention, especially in today's nearly-full-employment economy.
"A healthy economy and a three-percent employment rate may spell prosperity for Connecticut," Mazzotta notes, "but they create problems of another sort for many employers. There was a time in the not-too-distant past when finding qualified help was easy. The reverse is true today.
"Consequently, companies are experiencing high rates of turnover," she explains. "Employees are leaving for what they consider better opportunities - higher pay or improved work environments."
In Sickness and in Health
You're working hard to keep your employees happy; you've also got to try to keep them as healthy as possible.
Corporate fitness programs are a great way to accomplish this - either at on-site fitness facilities or a local health club. But when employees do get sick or disabled, be sure you are equipped with the right insurance to handle it.
How many employees ought you to have before you should start offering health insurance?
"One," says Steve Glick, president of the Chamber Insurance Trust.
Glick echoes Mazzotta's assessment of today's employment marketplace. Employers must be competitive in the plans they offer to attract and retain good help. After all, the competition out there - especially from large corporations providing attractive health-care plans - is fierce.
"There are different insurance needs for different phases of business growth," explains Glick. "If I was just starting out and left the benefits of my last job, I'd buy a bridge plan - something that would carry me [and prospective employees] for, say, three, six, nine months - until I know what my cash flow is.
"The important thing is to offer something," emphasizes Glick. "It may not be the richest health-care plan, and it will probably be a managed-care plan with a higher co-pay - say, $20. Then I would purchase a disability plan for myself [to ensure that salary is paid in case of long-term absence from work], a business overhead expense plan [BOE] to protect things like rent, and then, after a year or so, when the business has developed some value, a life-insurance plan [on the principal]. Then you can start expanding your health plan to offer more for everyone," says Glick.
"After about four years or so, when you are showing some profit, you should add a retirement plan so you can take your tax profits for yourself and your employees," says Glick.
The key, he says, is to consult with a professional agent and customize your plan.
"The real goal of a good agent is to go and listen to your needs - not to sell you something," says Glick. "We evaluate your business, your concerns, and come up with a plan customized just for you. As your business grows, your plan grows.
"One key new development today is something called 'voluntary benefits,' Glick says. "Say you have ten employees, and two of them want, say, dental. Now you can offer them a plan that they would pay for, but at a group rate. If they had to pay for it themselves, the cost would be out of sight. They could never do it."
Glick explains the genesis of so-called voluntary benefits. "Carriers now have become more liberal in their eligibility requirements," he says, "and this helps small businesses. Creativity can be used to develop a portfolio that looks bigger than it really is. You can offer these things to your employees and they pay the group rates, but as your company grows, you can take more and more of the costs away from them."
Glick vigorously cautions against buying your own business insurance over the Internet.
"It's so important to meet face-to-face with an agent to evaluate your needs," he says. "The computer is great for research and information, but it's nothing like sitting down for a cup of coffee with a human being and create exactly the plan your business needs."
Sell, Sell, Sell
In these hyper-competitive days, selling your business is even more important than selling your service or product. Teri Fogler-Binkley is the owner of Starving Artist design studio, and specializes in helping small businesses do just that.
"When I meet with a client," she says, "we always look at the whole picture, and not just the immediate marketing need; we forecast the need for an entire fiscal year.
"A lot of businesses can be short-sighted when it comes to producing marketing materials," Fogler-Binkley explains. "They spend their budget in a few months and then have nothing left over for the rest of the year."
As an example, she says, "If we are working with print media, I never print just one piece. Once you're on press, it costs surprisingly little to add more pieces - a business card, folder, brochure, stationery - we do it all at once."
Fogler-Binkley emphasizes the importance of devising a complete marketing plan, with a focused message and a consistent look.
"This can be translated into company logos, brochures, ads, media copy, a Web site - whatever a budget reasonably allows. "There has to be cohesion among all your marketing materials," she explains.
"Clients are definitely becoming more savvy," Fogler-Binkley says, about the services they are purchasing. And that's good news.
"I like to involve them in the process throughout every stage," she says. "My job is to sit and really listen to them. What direction do they want to head in? What do they want to get out of the job I'm doing for them?"
Explains Fogler-Binkley, "You want your company to have a professional look, and in order to actually save money in the long run, a marketing professional can help you project your best image."
Casting a Wide Net
Does every small business need a Web site?
"Is it very important? Is it critical for everyone in business? I would say no," says Michael Brooks, project manager for SNP Technologies.
Brooks' company will meet with new clients, determine their Web site needs, or even determine it's not necessarily an area they need to get into right away.
"First of all, a business has to understand who its audience is," Brooks explains. "Once you know this you can think about whether the people in your audience are likely to take advantage of your Web site."
"Most people will answer with an emphatic 'yes,'" says Brooks, "when asked if they want a Web site for their business. But you have to understand your budget and your audience," he stresses, "before you can honestly say it makes sense.
"You need to look at the competition - what are they other people doing?" Brooks says that SNP Technologies can determine whether establishing a site is right for your business - and, if it is, how elaborate the site needs to be.
"We look at how much interactivity is required on a site we build," Brooks explains. "For example, one of our clients is Yale Dining Services. Once or twice a semester they like to include a survey for students."
So Brooks designs the site so that as the surveys are responded to, a central databank collects and compiles the information automatically, so that the client can monitor and analyze the results as they become available.
The needs of your business may not be so complicated. In fact, Brooks says you may even be able to do it yourself.
"There is a Web site called bcentral.com from Microsoft," he explains. "You can design and build your own Web site here using a template they provide and cutting and pasting various options offered on the site."
Brooks cautions that the Microsoft product is not a unique design presence, and that the business owner's choices are limited with this "cookie-cutter" approach.
Still, "It actually looks pretty good," he allows. "But you can't go outside their range of options."
There are also "sell-on-the-web" sites like yahoo\store.com, with which retailers can use a similar cookie-cutter approach to design a Web site where people can pick up their shopping carts and buy what they have to offer.
These sites charge a fee, Brooks notes, but can also serve as useful informational locales for entry level Web builders, even providing how-to guides for each step of the way. Brooks suggests businesses that can allocate even only $1,000 a year to establish a Web presence consider this approach.
In general, though, Brooks and other will tell you, it's like any other service.
"You'll have a professional look," he says, if you go to the experts. "And that will reflect on you."
In other words, you get what you pay for.
And what kinds of information should you include on your site?
"Start with some general information on your business," suggests Brooks. "Who you are, what your product or service is, and a bit of history of the business.
"Again," he stresses, "it goes back to identifying your audience so you can identify your content. You need your home page, which serves as a portal to the different areas of your site, an 'about-us' page, a product or services page. You need a 'contact-us' page where you can receive emails, a FAQ [frequently-asked questions] page - maybe a shopping page if you are selling a product."
One thing Brooks stresses is a links page.
It's very important that your Web site doesn't stand alone on the Internet," he says. "You need a place where you can link to different sites that you have a synergy with. For example, if you're a dentist you want to link your site to the ADA [American Dental Association] site. It's good business - providing visitors with resources and providing reciprocity to those who have helped you."
So many things to consider - which is why most business owners would do well to choose a professional to work with. In the end, if you do decide to proceed with the Web site concept, Brooks recommends you do it in a timely fashion for a very simple reason: getting the domain name you desire.
"A lot of domain names have been taken," he warns. "It's best if you use your business name when choosing your domain name, but don't be surprised if that has already been done."
If you do need to devise something else, Brooks advises business owners to keep it as simple as possible: Don't include any numbers (people won't know whether to use numerals or spell each number out), don't use hyphens, and don't use homonyms. In short, make it as easy as possible.
Once your site is up and running, it's significantly more important to let people know about it. Be sure to advertise your Web site as much as possible. Print or broadcast it in every ad, brochure and postcard you send out.
Talk Isn't Cheap
Installing enough phones to get your business up and running can be a tricky proposition. As with each of the issues discussed above, the most important thing to do is plan your needs carefully.
Are you in retail? If so, don't overlook the phone lines you'll need for credit-card purchases. All businesses need to remember to include a fax line and one devoted to so-called intent use.
"There are so many things to consider when you are buying a phone system," says Ron Gallant, sales manager for Baldwin Communications in Cheshire. "I like to come to you, to sit down in your business environment for a few minutes. I can learn a lot - just by watching the receptionist answer the phones - about what the company really needs."
One of the key factors Gallant stresses is to consider how expandable the product you are buying really is.
"A lot of companies have invested money into phone systems that can't grow with them," he cautions. "Let's say you bought a phone system a few years ago and now you want to add a voice-mail option. Now you have to buy a whole new system because it's cheaper to do that than buy the necessary equipment you'd need to upgrade the one you've already invested in."
Gallant strongly advises sitting down with a telecom professional to assess your business needs right from the start.
"I want to know where your business is going," he explains. "How much are you going to grow? What will your future needs be? Put aside an hour and meet with me so we can install a system that will perfectly fit your company's needs."
It's important to get support with your phone system as well. Make sure your provider can come and train you and your employees on features such as voice mail and other options. You'll want to optimize the system once you invest in it.
"There are so many options out there now," Gallant says. "Do you want to answer your phone right from your computer? No problem. Of course, it's going to cost you."
Obviously, the more features you add, the higher the price points. But it's not necessary to explode the budget in order to get your needs fulfilled.
The key is to sit with someone who will take the time to get your phone system up and running and match it directly to where your business is today - and where you expect it to be in the future.
The Computer Conundrum
Regardless of the size of your business, you are almost certainly going to need a computer system.
"You can buy equipment just about anywhere," notes Richard Sgveglia, vice president of Advanced Office Systems in Branford. "The important thing is to get service and support once your system is installed.
"We make this a part of our whole sales package," he adds. Sgveglia considers a continuing relationship so important that, "If a business owner doesn't want that part of it, we tell him we're not willing to do business with him.
"It's kind of like buying a car," he explains. "Say you were going to buy a car and you'd never bought one before. You might not even know you need a key to start it with. Once you buy the car, you need to constantly service it with gas, oil. These are necessities - as is computer support and training."
Some of the newest developments in the computer field include the sophistication of networking systems and evolving Internet connections.
"It used to be everyone had a modem to dial into the internet," explains Sgveglia. "Now its DLS [a digital subscriber line] or a cable [modem] connection."
One of the most important features of any corporate computer system is a backup capability.
"Every night at 11 p.m. we back up on tape our entire computer system," Sgveglia says. "That way if there is a fire or something catastrophic, we can immediately and entirely restore our business files."
Whatever your needs, Sgveglia emphasizes the importance of depending on trustworthy professionals to assemble the package your business needs.
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