Monday, January 17, 2011

Small-business advice: How to make more international sales

By Karen E. Klein
January 3, 2011

Quantcast Quantcast

Dear Karen: I want to make more overseas sales in 20011. Do I need a foreign distributor?

Answer: It certainly helps, said Kathleen Brush, an international business consultant based in Seattle. "Finding a good local partner in the country you're targeting will help you understand business and legal details you would have tripped over," she said.

Brush recommended using the Gold Key Matching Service offered by the U.S. Commercial Service. "They do credit checks, criminal checks, they walk you through the distribution process and advise you about what you need to look for" in any country where you want to start selling, she said.

It is important to take your time and make sure you have found a good distributor before you ramp up international sales. "Small businesses often make mistakes because they are anxious and they want to make money right away. Be patient and get everything set up properly before you start," she said.

• Turning holiday customers into regulars

Dear Karen: My business was up over the holidays. How can I extend that momentum into this year?

Answer: Create incentives in the form of gift cards or discounts that encourage customers to return in 2011. Encourage those who are redeeming gift cards to reload them.
"Offer a bonus for customers who reload their gift cards after redemption. For instance, a free drink with a $25 reload or a $5 bonus on a $50 reload," said Barbara Roeber, senior vice president at electronic payment firm First Data.

Small-business questions? E-mail Karen at

5 Steps to Start a Business and Make it Work

Jan 10, 2011 -

I am often asked if I have found a secret -- or at least a consistent answer -- to successfully building businesses over my career. I've spent some time thinking about what characterizes so many of Virgin's successful ventures and, importantly, what went wrong when we did not get it right.

Reflecting across 40 years I have come up with five "secrets."

1. Enjoy what you're doing.

Because starting a business is a huge amount of hard work and requires a great deal of time, you better enjoy what you're doing. When I started Virgin from a basement flat in West London, I did not set out to build a business empire. I set out to create something I enjoyed that would pay the bills.

There was no great plan or strategy. The name itself was thought up on the hoof. One night some friends and I were chatting over a few drinks and decided to call our group Virgin, as we were all new to business. The name stuck and had a certain ring to it.

For me, building a business is all about doing something to be proud of, bringing talented people together and creating something that's going to make a real difference to other people's lives.

A businesswoman or a businessman is not unlike an artist. What you have when you start a company is a blank canvas; you have to fill it. Just as a good artist has to get every single detail right on that canvas, a businessman or businesswoman has to get every single little thing right when first setting up in business in order to succeed. However, unlike a work of art, the business is never finished. It constantly evolves.

If a businessperson sets out to make a real difference to other people's lives, and achieves that, he or she will be able to pay the bills and have a successful business to boot.

2. Create something that stands out.

Whether you have a product, service or a brand, it is not easy to start a company and survive and thrive in the modern world. In fact, you've got to do something radically different to make a mark today.

Look at the most successful businesses of the past 20 years. Microsoft, Google and Apple, for example, shook up a sector by doing something that had never been done and continually innovating. They are now among the dominant forces.

3. Create something that your employees can be proud of.

The people on your team are your biggest assets.

4. Be a good leader.

As a leader, you have to be a really good listener. You need to know your own mind but there is no point in imposing your views on others without some debate. No one has a monopoly on good ideas or advice.

Get out there, listen, draw people out and learn from them. As a leader you've also got to be extremely good at praising people. Never openly criticize people or lose your temper, and always lavish praise on your colleagues for a job well done.

People flourish if they're praised. Usually they don't need to be told when they've done wrong because most of the time they know it. If somebody is not working out, don't automatically throw him or her out of the company. A company should genuinely be a family. So see if there's another job within the company that suits them better. On most occasions you'll find something for every single kind of personality.

5. Be visible.

A good leader does not get stuck behind a desk. I've never worked in an office -- I've always worked from home -- but I get out and about and meet people. It seems like I'm always traveling, but I always have a notebook in my back pocket to jot down questions, concerns or good ideas that occur along the way.

If I'm on a Virgin Atlantic plane, I make sure to get out and meet all the staff and many of the passengers. If you meet a group of Virgin Atlantic crew members, you are going to have at least 10 suggestions or ideas. If I don't write them down, I may remember only one the next day. Get out and shake hands with all the passengers on the plane, and again, see if anyone has a problem or suggestion. Write it down, make sure that you get their names, get their e-mail addresses, and make sure the next day that you respond to them.

Of course, I try to make sure that we appoint managing directors who have the same philosophy. That way we can run a large group of companies in the same way a small business owner runs a family business -- keeping it responsive and friendly.

When you're building a business from scratch, the key word for many years is "survival." It's tough to survive. In the beginning you haven't got the time or energy to worry about saving the world. You've just got to fight to make sure you can look after your bank manager and be able to pay the bills. Literally, your full concentration has to be on surviving.

Obviously, if you don't survive, just remember that most businesses fail and the best lessons are usually learned from failure. You must not get too dispirited. Just get back up and try again!

Richard Branson is the founder of the Virgin Group and companies such as Virgin Atlantic, Virgin America, Virgin Mobile and Virgin Active. He maintains a blog at You can follow him on Twitter at To learn more about the Virgin Group


Monday, January 10, 2011

Small Business Isn't Celebrating Health-Care Reform

Evidence that the new health-care law has increased coverage and brought down costs has not materialized yet, says Scott Shane

Click here to find out more!

In March, Congress enacted the Patient Protection and Affordable Care Act (PPACA), a 2,000-plus-page law designed to dramatically change how health insurance is provided in this country. The law might have been more aptly named the Small Business Health Insurance Act because its effects—both good and bad—will fall most heavily on small companies.

That's because we have an employment-based health-care system and small businesses are less likely than large ones to provide employee health insurance. In 2010, the Kaiser Family Foundation, which keeps tabs on health insurance coverage, reported that 99 percent of businesses with 200-plus employees provided workers with health insurance, as compared with only 68 percent of businesses with 3 to 199 employees.

Given these numbers, it's fair to focus on small businesses when looking at the impact of the new law.
While it's only been eight months since President Obama signed the PPACA into law, and many of the law's provisions won't kick in for several years, advocates of the legislation argue that it is already benefiting small businesses. Under the new law, the owner of a very small business can obtain an income tax credit against the cost of employee health insurance premiums. The Wall Street Journal reported late last year that "the number of small businesses offering health insurance to workers is projected to increase sharply this year … a shift that researchers attribute to a tax credit in the health law."

Tax Credit Incentive?

Many of the law's supporters are basing this assessment on data from the Kaiser Family Foundation, which found that the percentage of firms with three to nine employees offering insurance jumped from 46 percent to 59 percent between 2009 and 2010, driving the share of all firms offering health benefits from 60 percent to 69 percent.

However, the tax credit isn't responsible for this change. Sellers of small group policies report little change in demand for employee health insurance policies among small business owners. The sellers explain that compensation limits for employees make few small businesses eligible for the credit and that the low value of the credit does little to get business owners to provide employee health insurance.

The Kaiser Family Foundation reports that the uptick in the share of firms offering employee health insurance is an artifact of high failure rates of the most vulnerable small businesses (which tend not to offer employee health insurance) during the economic downturn. With more of the companies not providing insurance out of the sample, the share of those providing insurance has increased for purely mathematical reasons.

Moreover, other surveys show the opposite trend. American Express Open Small Business Monitor, which surveys approximately 700 small business owners with fewer than 100 employees twice a year, reported a drop in the share of small businesses offering employee health insurance from 66 percent in March 2009 to 45 percent in September 2010.

Premium Costs

Another claim is that the new law is bringing down health insurance premiums. Even if the law might, possibly, maybe, at some time in the future, bring down premiums, it hasn't done that yet. Trade publication Employee Benefit News explains that private companies' spending on health insurance is expected to have increased by 4.3 percent in 2010, a rise from the 2.5 percent expected the month before the PPACA was passed because of changes in COBRA policies.

The passage of the law also hasn't stopped companies from pushing a higher share of insurance costs on to employees. From 2009 to 2010, the Kaiser Family Foundation data show that the average employee share of health insurance coverage for a single individual rose from 13.9 percent to 15.1 percent. Moreover, most of the increase in worker contributions was at companies with fewer than 200 employees, which saw single-coverage worker contributions jump 38.4 percent over the past year, from $625 to $865 per year.
Given these patterns, has the PPACA done anything yet to change small business owners' health insurance costs or willingness to cover employees? The answer is no, largely because most of the major provisions of the plan—coverage mandates and penalties—don't kick in until 2014.

So why am I challenging the claims of the law's cheerleaders? Because its effect so far has been a net negative. That's because many business owners have formed negative expectations of the future effects of the law. For instance, a survey of 459 businesses conducted by Fidelity Investments in June revealed that 49 percent of small employers expect the new law to increase their costs. Many small business owners are responding to these expectations by passing on health insurance costs to employees, by changing the type of insurance they offer, and by planning to drop employee health insurance coverage in the future. (The same Fidelity survey reports that 22 percent of small business owners expect to drop health insurance in response to the law.) In short, any "evidence" that the PPACA has cut small business employee health insurance costs or increased coverage isn't real.

Scott Shane is the A. Malachi Mixon III Professor of Entrepreneurial Studies at Case Western Reserve University.

Tuesday, January 4, 2011

Management Flubs Made by Rookie Bosses

Some people start their own business to escape a bad boss. Albert Ko became one after launching his.
The owner of DealPerk LLC, a year-old coupon website in Irvine, Calif., Mr. Ko admits that he developed a habit of shouting at his three employees whenever they made mistakes, which created a toxic work environment.

"They were scared," says the first-time entrepreneur, who's since changed his approach to discipline. He now pulls offenders aside to discuss what went wrong and offers suggestions on how they can improve. "I could see that it hurt morale."
Being the boss is a difficult job for many business owners to master. Their expertise is typically in the products or services that they sell and not supervising others. As a result, entrepreneurs are often guilty of handling employee mishaps poorly—or for allowing such blunders to occur in the first place.

"They're in business because they have talent in their field, but it doesn't mean they're capable managers," says Rod Means, a district director in San Diego for SCORE, a nonprofit small-business mentoring and training organization.

The root of the problem is that entrepreneurs see the workplace differently than most workers, says Wayne A. Hochwarter, a professor of management at the College of Business at Florida State University. "When you're running your own place, you've got everything vested in it. It's an emotional thing," he says. But for the average employee, "it's just a job, and sometimes not a well-paying job."

Here's a look at other management mistakes entrepreneurs confess to having made—and how to avoid them:

Failing to check for competence. Jimmy Tomczak, founder of Paper-Feet, a sandal manufacturer and retailer in Ann Arbor, Mich., says an intern once incorrectly assembled 25 of his company's products, costing the business $500 in retail sales. He had showed her what needed to be done but failed to check if his instructions registered clearly. "Now I make sure that new hires can demonstrate competence before letting them go on their own," he says.

A simple way to prevent costly errors is to take the time to patiently teach employees how a job should be done, says Dr. Hochwarter. Too often entrepreneurs hire people without providing clear job descriptions or training, and instead leave workers to their own devices, which can lead to confusion and conflict, he says.

Lying to avoid hurt feelings. Ethan Fieldman, co-founder of Group Interactive Networks Inc., a software company in Gainesville, Fla., says he once severed ties with a contractor whose job performance wasn't up to par by telling him that the firm didn't have any more assignments available. But afterward, Mr. Fieldman says he and several employees at the company began regularly receiving emails from the laid-off contractor asking if any new jobs had opened up. It's been six years and Mr. Fieldman says the emails continue to spam their inboxes.

Though it can be awkward to deliver bad news, managers should be honest about why they're dismissing someone, says Daniel M. Murphy, co-founder of the Growth Coach, a small-business-coaching franchise in Cincinnati. "Giving the truth is good for the business and for the development of that person," he says. Any sort of lie "could spill down throughout the organization," resulting in the spread of false rumors.

Blindly trusting workers. When Wendy Maynard co-launched Kinesis Inc., a Portland, Ore., Web-design and marketing firm, in 2000, she says she and her business partner didn't create an employee handbook or even verbally express how they expected their staff to behave. "We made a big assumption that our professional norms were other people's professional norms," she says. Yet some of their first hires came to the office wearing low-cut jeans with underwear and tattoos showing. One staffer worked on freelance assignments for other companies while on the clock. "We quickly had to change things," Ms. Maynard says.
Entrepreneurs should define in writing what kind of behavior is allowed and what isn't in the workplace, says Janice Brown, founder of Brown Law Group, a San Diego law firm that specializes in employment litigation. The effort will not only deter employee misconduct, but also help a company fight wrongful termination lawsuits or false unemployment claims by former employees, she says.

Giving mixed signals. Hajo Engelke, founder of Custom Choice Cereal LLC, an online retailer in Durham, N.C., normally wears a t-shirt, shorts and flip-flops to work. Last summer, he teased a new recruit for showing up in a suit and dripping with sweat. Yet the very next day, Mr. Engelke walked into the office dressed in just the kind of formal outfit he criticized his employee for wearing the day before. (The reason: Mr. Engelke had a meeting with a potential investor, which he neglected to mention to the new recruit.) Upon seeing Mr. Engelke dressed this way, the employee's "jaw dropped," recalls the entrepreneur. "Every day after [the employee] would ask what he should wear to work."
Entrepreneurs need to remember that workers look to them for cues on to how to behave, warns Mr. Murphy. "As the owner, you are in charge of setting the tone for the environment and the culture," he says. "What employees want more than anything is clarity of what are the rules and expectations."

Write to Sarah E. Needleman at