Frequently Asked Questions (FAQ)
This page contains FAQs About both SCORE® and about specific business issues.
Click on the hot-linked Problem/Question to view the answer
QUESTIONS ABOUT SCORE®
What is the SCORE® organization?
How can SCORE® help me in changing economic times?
What is email counseling?
What qualifies SCORE® to give business advice?
What kind of counseling does SCORE® provide?
Are business secrets safe with SCORE®?
Does SCORE® offer other services?
How can I contact SCORE® for assistance?
How can I become a counselor for SCORE®?
How can I become a SCORE® client?
BUSINESS QUESTIONS AND PROBLEMS
I am interested in employing a foreign national. What must I do?
We are a small struggling mom and pop internet business. Quite often, we are stuck with charge-backs from customers. We lose the amount of the transaction and are charged a fee of $20 to $40 for each charge-back. We have also heard that if our chargeback rate exceeds 1-1.5%, our Visa/MasterCard merchant account may be closed. If we don't get some relief from this problem soon, we will have to close the business. What can we do?
I was refused a bank loan for my small business. What does a bank look for?
My problem is cash flow. Sales have been increasing nicely every month. My customers take from 45 to 90 days to pay. My personal credit is over-extended. I have very little collateral, and the banks won't talk to me because I haven't been in business for three years.
My business is just a few years old and customers are not coming in as fast as I had hoped when I started. Do you have any ideas on how I can build my customer base?
I have a name of an organization and I would like to reserve the name. Where do I begin? How do I know if anyone else may have the same name?
I have an invention I want to patent. Can I make the application myself to save money?
Why is a business plan necessary?
What is the best legal form for a new business?
I am a small business owner and I never have enough time to do all the things I should do. What is the answer?
I'm starting a new business and I can not come up with a good name. Any suggestions?
Should I register the name?
I can't afford to increase my advertising budget. How can I increase sales?
I have a small business and can not find help. How can I compete against the large companies who offer extensive benefits?
What is the difference between State Sales Tax and Consumer Use Tax?
Why don't all out-of-state businesses collect use tax for other states?
What about sales tax rules on Internet sales?
Q. What is the SCORE® organization?
A. SCORE® (Service Corp of Retired Executives), “Counselors to America’s Small Business,” is a nonprofit association comprised of 11,500 and growing volunteer business counselors throughout the U. S. and its territories. There are about 400 SCORE chapters in urban, suburban and rural communities. SCORE members are trained to serve as counselors, advisors and mentors to aspiring entrepreneurs and business owners. These services are offered at no fee, as a community service. SCORE was formed in 1964 and nearly 4.5 million Americans have utilized SCORE services.
Q. How can SCORE® help me in changing economic times?
A. In times of economic change, you must be diligent in preparing your plans. Begin developing a business plan with realistic sales projections and a plan to hold the line on costs. SCORE® can provide advice to help you develop or update your plan. Our counselors can also assist in analyzing your current results. Clients tell us some of the best ideas for their business flowed from discussion with a SCORE® counselor.
Q. What is email counseling?
Email counseling is an email exchange between a soon-to-be entrepreneur or small business owner and a volunteer, a SCORE® business counselor. Email counseling gives you the opportunity to send email questions about small business to a SCORE® counselor anywhere in the country. Go to www.score.org and then press on “Ask Score.” Send a question and a SCORE® counselor will reply with his or her answer. The client should keep the dialog going as long as there are questions for your business counselor.
Q. What qualifies SCORE® to give business advice?
A. The key qualification SCORE® counselors bring to clients is real-world experience. SCORE® business counselors have general management and specific industry experience that can benefit your business. SCORE® business counselors may be working or retired business owners, business executives or operations managers. All SCORE® counselors receive specialized training in counseling and mentoring.
Q. What kind of counseling does SCORE® provide?
A. SCORE®’s experienced business experts provide general business advice on everything from how to write a business plan, to cash flow management, to developing a small business advisory board. Assistance for aspiring entrepreneurs may involve investigating the market potential for a product or service and assessing the capital needs to start a business. Counselors can provide insight into how to start a business, operate a business, buy a business or franchise and sell a business.
Q. Are business secrets safe with SCORE®?
A. Yes. All SCORE® business counselors honor the client’s right to proprietary and confidential information. Client information remains confidential. All SCORE® counselors abide by an organization Code of Ethics, which includes protecting the confidences between client and counselor. Each year, counselors reaffirm their commitment to the Code of Ethics.
Q. Does SCORE® offer other services?
A. Yes. SCORE® offers a low-cost seminar titled “How To Really Start Your Own Business.” Special events, orientation presentations, seminars and similar activities may be held when as required.
Q. How can I contact SCORE® for assistance?
A. You can contact SCORE® a number of ways. You can call us at 319-362-6405, extension 2005, to ask a question or to make an appointment for face-to-face counseling during our business hours. You can also complete a Request for Counseling form and a counselor or team of counselors will call you to make an appointment to meet at the SCORE® office, at your place of business, or at a neutral location agreed upon by you.
BUSINESS QUESTIONS AND PROBLEMS
Q. I am interested in employing a foreign national. What must I do?
A. There are two general categories of people who may work or do business in the United States other than citizens or nationals of the U.S.
1. People who have received permission to work temporarily with an intention to return to their foreign residence. Business personnel are designated by the initials used in the law to describe the limitation for each category. They are B-business visitors, E-treaty countries, F-students, H-professional persons, 1-investors, J-exchange visitors, K-intended spouses of U.S. citizens, L-intra-company transferee executives, M-students with special permission to work, 0 & P-entertainers, athletes or persons with extraordinary ability and TN-Canadian or Mexican workers who qualify under the North American Free Trade Agreement; and
2. People who have obtained permanent residence by a qualified job offer to work for a U.S. company and whose application has been approved by the U.S. Department of Labor and U.S. Immigration or obtained residence by application of a U.S. citizen or lawful permanent resident spouse, parent, son, daughter, or sibling. Sibling is somewhat misleading because the waiting period for a quota number for a sibling is approximately 10 years after being qualified by application to the government.
Each of the above classifications has specific limiting characteristics, such as type of work experience, education and job offer. Each category has extensive regulations, which need to be analyzed. For example, the H-IB nonimmigrant visa may be used to bring workers temporarily into the United States if the employee will work in a "specialty occupation" or professional position. This category is often used by foreign students upon completion of their educational requirements in the United States. They use this as a first step in the extensive process of obtaining permanent residence by a permanent job offer. There have been significant changes in the U.S. employers' obligations to qualify for hiring these foreign employees.
The 0 & P nonimmigrant visa categories enable foreign nationals who have demonstrated extraordinary ability or achievement in a specialized field, or who have critical skills or experience to obtain temporary working visas. The P category is available for foreign entertainment groups, athletes, or individual entertainers who wish to enter the United States temporarily to perform under a reciprocal exchange program or a program that is culturally unique. Merely to alert you to the complexities of this law, an O visa permits extended periods to a maximum of three years. A P visa may be extended to a maximum of ten years. Organizational groups are allowed to stay here for the term necessary to complete the event or events for which they have been permitted to enter.
The transfer of a foreign company's key employee to its U.S. subsidiary or affiliate is available to executives, managers, and employees with specialized knowledge for a limited number of years.
Treaties between the United States and other countries allow foreign nationals to come to the United States to manage substantial investments. There is no fixed dollar amount for treaty investment. Those qualifying can enter for long-term business objectives, but must renew their permission to stay here after specific periods of limitation. There are more than 150 countries presently listed as treaty countries with the United States and this is a constantly changing group.
Persons who enter as business visitors are allowed to conduct business only for a foreign company.
Foreign nationals, who are skilled or educated and have job offers, may obtain permanent resident status. The prospective employer must obtain labor certification and approval of a petition. This requires proof of an unsuccessful recruitment for local employees. The total process is very complex and requires considerable time, often a year or more.
As you may already know, all employers are required to keep records of every employee's qualification to be employed in the United States. That, of course, is the Employment Eligibility Verification Form, 1-9. This must be kept on file for every employee.
Q. We are a small struggling mom and pop internet business. Quite often, we are stuck with charge-backs from customers. We lose the amount of the transaction and are charged a fee of $20 to $40 for each charge-back. We have also heard that if our chargeback rate exceeds 1-1.5%, our Visa/MasterCard merchant account may be closed. If we don't get some relief from this problem soon, we will have to close the business. What can we do?
A. Most merchant account providers (MAP) also offer security services for their merchant clients. Quite often they don't inform you or the information is hidden in an obscure newsletter in the junk mail. Often these services are free for the asking or low cost to merchants:
1. Look into address verification (AVS), a system that alerts you to clients who do not know their own card billing address. Use it with care since many clients do not enter the billing address for legitimate reasons. Call the MAP security service if you suspect AVS fraud.
2. Also look into systems that allow merchants the option to require the customer to enter the security code. It is the three digit number (Visa, MC, Discover) following the credit card number on the back of the card. On AMEX it is four digits. Again, use this service with caution since the customer may have a valid reason to avoid entering the number.
Since the merchant account provider is behind the gateway, they may not provide secure transmission between your shopping cart and the gateway. If you use a third party for the secure service, you will need to ask them to provide these services and arrange to have these options/requirements installed in your shopping cart. Also, your shopping cart should collect the customer's telephone number so you can easily check back on problems.
If you currently experience more than one chargeback per 1,000 orders, these services will definitely be helpful. Some customers accidentally charge back because they do not recognize the charge on their bill. Make sure the MAP properly identifies your company name with the charge to the customer's card company. A few more are either card thieves or simply don't want to pay for a service, the fraudulent 1% and the ones to watch for.
The reason large corporations avoid fees is they generally own their gateway and quite frequently own the merchant account provider as well. Since secure gateways cost $2 to $3 thousand monthly to lease, they are out of the range of most small merchants.
Visa/MC and others probably penalize the MAP for charge-backs and it is up to the MAP as to how much to charge the merchant. Visa/MC uses the 1-1.5% formula since their number crunchers say honest merchants can keep charge-backs below this number. The ones they are targeting are the pushy and dishonest phone sellers who can’t reasonably meet the threshold. It might seem that the merchant is being unfairly burdened but the fact is we all pay for fraud since merchandisers eventually pass their losses to their customers through product mark ups.
The best defense is using due diligence when reviewing credit card orders. Always politely telephone suspected fraudsters to make sure they are ordering honestly. If in doubt, it is better to politely decline service than to risk a charge-back.
It appears you are already shopping around for the best MAP deal. Ask them upfront for their charge-back policies. Some MAPs allow a few free charge-backs monthly or annually keeping small merchants without fees. Of course you are still debited the amount of the charge.
Q. I was refused a bank loan for my small business. What does a bank look for?
A. Here is what a lender looks for from the viewpoint of a banker who teaches the Finance segment at the SCORE® Seminar, How To Really Start Your Own Business:
Your business plan. A well-considered plan can be a significant tool for shaping the bank's perception of its level of risk in granting the loan. Banks will be looking to see how realistic your financial projections and marketing plans are and whether you have good management in place, as well as your market opportunity and level of your experience. Your business plan shows the bank that these elements are in place. A good business plan may make the difference between a risky proposition and a good opportunity for investment (a bank loan).
The transaction itself. The bank must feel that your borrowing represents a good loan based upon its lending criteria.
The industry. Many banks shy away from certain industries, most commonly restaurants, construction, gaming, and real estate. If a bank does not understand or feel comfortable making loans to companies in your industry, find one that does know your industry.
Economic conditions. Unfavorable economic conditions in your industry can increase a bank's perception of risk and reduce your chances of getting a loan.
Borrower's financial position. Lenders will asses the health of your business and your personal financial history. This includes timeliness of loan, bill, or vendor payments.
Quality of collateral. Banks will asses the quality of your collateral and whether it is available (liquid).
Capital. Lenders will want to determine how much of your own money or "sweat equity" has been invested in the business.
Experience. Lenders will consider your experience in the industry and whether you have the right management team.
Growth. Banks will review marketing and business plans to determine whether you have a manageable time line in place for your business' growth.
Profit. An important factor that banks consider is whether your business is profitable. Profit is revenue minus expenses. Will your business generate a 15% minimum profit on a consistent basis? Will profits grow year after year?
Q: My problem is cash flow. Sales have been increasing nicely every month. My customers take from 45 to 90 days to pay. My personal credit is over-extended. I have very little collateral, and the banks won't talk to me because I haven't been in business for three years.
A: Your problem is not unique for young companies. It is easy to over-extend your personal credit during a start-up.
You need a two-pronged approach to raise capital: solve the immediate cash crunch, and take concrete steps to improve the long-term personal financial picture.
For the short term, there are three possibilities:
- Factoring - A company sells accounts receivables for a discounted price to bring in cash sooner than later.
- Accounts receivable financing - A company uses accounts- receivables as collateral for a short-term loan from the bank or other financier.
- Contract financing - This method is only applicable if you work on contract. A company borrows money from a financing company against a percentage of the outstanding contracts.
These three options should be viewed strictly as short-term, last-ditch financing methods since they eat a big hole in your profit margin. You do this to give your company a chance to build up a longer track record, which will hopefully allow you to get cheaper financing.
In the second phase, do everything possible to improve your credit rating. Do not use your credit card until you are current and then keep it current.
Pay your business and personal bills on time. Review your operating expenses to see if you can squeeze it anywhere. Press your customers for quicker payment. Offer an early discount, but do not let them take it beyond the discount terms.
Two sources of capital are worth trying that take into consideration lack or credit or collateral if you have a strong business plan and good business fundamentals. Call the U.S. Small Business Administration 1-800-U-ASK-SBA and ask about the SBA Express and LowDoc programs. Also contact the state Department of Economic Development 1-800-532-1216 (in Iowa) to find economic development programs for which you qualify.
Q: My business is just a few years old and customers are not coming in as fast as I had hoped when I started. Do you have any ideas on how I can build my customer base?
A: Have your existing customers increase your client base for you through “word of mouth.” If your customers are happy with the service they will tell others, so make it easy for them. Make use of the following 3 marketing tools.
Business Card: Have a professionally designed and produced business card and give two or more to every customer. A good business card will have your business address, telephone number, fax, email address, web site address, and any other methods customers may contact you. If possible, put a too-good-to-refuse offer on the card, such as a purchase rebate, discount, or free shipping using a customer ID number. You may also want to offer a “bounty” for new customers. Your goal is to encourage customers to spread the word about your business. Keep an address list of customers and use the list for mailing your newsletters.
Newsletter: Your newsletters will talk about your customer service, new products, company history, top employees, employee incentive awards, special offers, and other items of interest to your customers. These newsletters will give your customer a feeling of being an important part of the team. If you send your newsletter in an envelope, be sure to include at least two of your business cards with the too-good-to-refuse offer.
Customer Service: A great offer or price alone will not suffice unless it is delivered with a smile. Have a reasonable return or money back policy. If you meet the customer half way he/she will usually be satisfied.
Above all, remember that you are in business to make a profit. A good profit will allow you to pay your expenses, hire good employees, and most importantly – stay in business so you can keep serving your customers and provide a good wage for yourself and your employees. A good rule of prudent business is to determine your break-even price and keep your special offers above this price. Break-even is the point at which your profits are sufficient to pay all of the costs of doing business. When you offer a percentage discount, simply multiply the resulting price by 1 over the full price minus the discount expressed in proportions and make sure the result is at least break-even. For example, if full retail price for a product is $175, you want to offer a 40% discount, and break-even price is $95, analyze the offer as follows:
Multiply 95 X 1.667 (1/1-0.4). The result is 158.37. Multiply 175 X 0.6 (1-0.4). The result is 105. Analysis: As long as your regular price for this item exceeds $158.37 and is not more than $175 (the price the market will bear), you can offer a 40% discount to entice customers to buy and still earn a profit. The highest discounted price you can offer is $105. In other words, 40 percent off full retail is $105, ten dollars over break-even.
Q: I have a name of an organization and I would like to reserve the name. Where do I begin? How do I know if anyone else may have the same name?
A: Visit a domain name registrar and do a search on your name. You can find a comprehensive list of registrars at http://www.icann.org/registrars/accredited-list.html Most registrars currently support .com, .org, .net, .biz, .bz, .nu, .cc, .name and various country specific TLDs* like .de (Germany) .uk (England) and .fr (France). If you find the name available, you can register it for $50 or less. Many registrars even allow you to redirect the URL (domain name) to your web site for no additional fee even if you are using a free-hosting service.
Keep in mind that each TLD is a separate registration and the .com TLD has by far the highest name recognition (and is the hardest to get). If the .com name is already taken, you'll need to do a trademark search at http://tess.uspto.gov/ to make sure using another TLD does not violate anyone's legal trademark protection. The courts protect ® to the extent that any confusingly similar names may be an infringement. If you have concerns about this, contact an attorney familiar with trademarks. If a competing site uses the name with ™ they do not have it registered but may have a prior commercial use trademark right.
Again, contact an attorney if you have concerns.
If your name is available in .com and a trademark search does not find a record of it, you may trademark it if it meets U.S. Patent and Trademark Office (USPTO) guidelines. Visit http://www.uspto.gov/teas/ and study the application guidelines carefully. You can make the entire application online. Remember that you pay the fees up-front and there is no refund even if the USPTO rejects your application.
You can use a name in commerce without registering it as a trademark simply by affixing a ™ after the name. However, your ® protection can usually scare off any would-be trademark infringing. If you rely on ™ without registering it, you may someday need to go to court to prove that you are the rightful owner of the name, an option that could be very expensive in the long run. There may also be other name registration requirements when using a name in business in certain localities. Contact your city or county auditor and your state tax agency for further guidance in this area. Remember, SCORE® does not offer legal advice, so always contact an attorney specializing in names and trademarks for legal advice in this field.
*TLD is the acronym for Top Level Domain. Technically, .com, .net and .org extensions are top level domains as opposed to most two letter country-specific extensions. Country specific extensions may be restricted to certain users or geographic areas.
Q. I have an invention I want to patent. Can I make the application myself to save money?
A. We strongly advice you use the services of a registered patent attorney. Use the initial consultation to discuss the invention. He or she will give you an honest opinion of the validity of your proposal. The following are paraphrased comments of a local patent attorney:
The rules and regulations for filing are extremely complicated. A layman would have great difficulty following the format required by the government. Even a lawyer not a specialist in patents would have problems. The most difficult part is making the claims, which defines what the patent covers. And this is important - you get only one chance to file. If there are errors or loopholes in your claims, you cannot make revisions after filing. Even a patent attorney cannot fix a patent that is incorrectly filed.
To receive a patent, the invention must stand two tests:
- Nothing like it has been done before, and
- It is different enough to meet government standards of invention.
This means it must be more than minor changes. If an object is molded in three pieces and you find a way to do it in one, it doesn’t qualify for patent protection. If an object was made of metal and you make it of plastic it also would not qualify. There must not be any loopholes allowing a patent attorney working for the competition to find ways to legally get around your patent.
A typical fee range would be $4000 to $7000, depending on how complicated the invention. The above cost includes a $1,100 USPTO fee. Of course it may end after the prior search if existing patents are found that would invalidate your idea. The patent attorney will cite existing patents searched when filing the application, thereby aiding the government reviewer.
You can do your own preliminary search in the database of all patents. Go to http://www.uspto.gov/patft/ and do a search. You can also save money by supplying good working drawings, descriptions and various claims. You should ask your patent attorney for a cost estimate so you can determine if you want to go ahead with the filing.
Q. Why is a business plan necessary?
A. A business plan is the foundation of running a good business. It is a requirement of any lending institution that you may contact for a loan. Even if you don't need a loan, the plan is a guide for conducting your business so you make better business decisions.
Here are the major elements of a business plan:
- Conduct Research: Find out how other entrepreneurs succeed, seek out industry data at your library, assemble information from your industry's trade association or visit http://www.rmahq.org to see what the financial trends are.
- Project Your Financials: Bankers and accountants will want projections on market size, sales, cost estimates, total revenue, expenses, and net profit.
- Obtain Working Capital: Starting and running a small business usually costs more than anticipated. 33% of new businesses fail for lack of working capital. Plan as if you will not break even the first year.
- Know Your Competition: Find out as much about them as you can by visiting their stores, understanding their market strategies and knowing how their products or services compares with yours.
- Location, Location, Location: For a retail business a safe, accessible location is critical. Will you rely on foot traffic? All locations, including home-based businesses must have adequate parking.
- Keep Accurate Records: You will need complete financial records to manage cash flow, maintain a good credit rating, and to document your tax returns.
- Obtain Expert Advice: You will bring your own strengths and weaknesses to the business. Plan on professional advice from an attorney and accountant. Seek counsel from successful business friends. There are for-profit companies who sell start-up business advice. Free help is available from SCORE and SBDCs (Small Business Development Centers).
- Purchasing: Predict the quantities you will sell, and at what cost you can buy to set competitive prices. Negotiate for the best volume discounts and favorable payment terms.
Q. What is the best legal form for a new business?
A. Which one is right for you depend on many factors, such as:
- How many owners there will be.
- What level of protection from personal liability the owners want.
- How owners want the business to be taxed
- How complex the management structure of the business will be.
After reviewing the various choices, you will see it would be prudent to consult a qualified business attorney to help you determine which of the following business forms is best for you:
- Sole proprietor. The company is owned by one person and is the simplest of all business forms. No effort on your part is required to form a SP. There are no required filings, no record keeping requirements and no administrative fees. You must file a schedule C with your personal tax return. The major disadvantage is that SP offers no protection from personal liability. In a judgment against your business, a creditor could take your business and personal assets.
- Partnership. If you and one or more other persons go into a business together without formally establishing a business structure, your business is a partnership. Similar to a SP, all partners’ personal assets are subject company obligations. One unique disadvantage of a P is that the actions of one partner can bind all of the other partners, even if done without the consent or knowledge of the remaining partners. Individual partners are taxed on the amount of net income received from the business.
- C corporation. This business form is generally not used for small, start-up businesses. Articles of Incorporation must be filed with the State. It requires a board of directors and officers. Shares are issued and may be bought by any number of individuals. Investors need not fear being sued individually for the business liabilities. Corporations are, however, fairly high maintenance and require formal management, regular meetings, written minutes and annual filings with the government.
- Subchapter S Corporation. This business form is popular because is allows a corporation to be taxed like a partnership, yet gives the liability protection of a corporation. The structure is less formal than a C Corp, and has fewer governmental restrictions.
- Limited Liability Company. As implied by its name, this business form combines the simplicity of a partnership with corporation-like protection from personal liability. Administrative requirements to maintain an LLC are simple, making this form ideal for owners lacking a strong business background. An LLC is taxed like a partnership, requiring the members to pay taxes based on their profit from the LLC. The company is required to file tax returns each year.
Q. I am a small business owner and I never have enough time to do all the things I should do. What is the answer?
A. The answer is in time budgeting. Some tasks always slip through the cracks or not given the proper attention just because we dislike doing them.
Here are five steps to effective time budgeting.
- List the tasks that must be performed. The key in this step is the difference between must and should. Some tasks may seem so obvious you do not feel a need to spell them out. List them all. It will help you give each task a priority.
- Construct a skills inventory of key personnel. What is each person especially good at? bad at? What does each person especially like to do or dislike doing? What can be done by key personnel that I am now doing?
- Analyze how tasks are now being performed. Is there a more efficient way of doing these tasks? Can the frequency be changed? Would it save time and/or money to have it done outside of the company? As an owner it is wise to delegate operational tasks to give you more time for management tasks.
- Determine the time required for each task. Work with 100 percent of time before converting to hours and minutes. Do not use the time you presently spend at a task, but rather the relative time required to perform in relation to all other tasks.
- Construct a time budget on a weekly basis. It is time to put numbers to those tasks you will do. Make a chart listing all the tasks you will do starting with the highest priority first. Then make the following columns: How often? ... How long? ... Total time required ... Time allotted.
After your first rundown you will probably find the total hours more than you want to spend. This is when you have to re-evaluate your time budget and make some hard decisions. You may have to hire more help. Did you leave any time for unforeseen crisis? Did you plan on any wasted time. No one can be 100 percent efficient.
Hopefully, this exercise will give you more time to enjoy the good life, but if not, you have the satisfaction of knowing that you are spending your time well.
Q: I'm starting a new business and I can not come up with a good name. Any suggestions?
A. You are wise to make a special effort to choose a good name. It is the first impression most people will have of your business, and you want it to be a good and lasting one. Large companies can imbed their name in our memory through large advertising expenditures. Small businesses must do this with cleverness.
There are three important criteria:
- It should tell or at least suggest what business you are in.
- It should be easy to remember... not too long.
- If possible make it a clever play on words, but not too cute.
It is quite common to connect the surname with the type of business, such as Smith Plumbing. It will suffice, but is not memorable. You do not want to pick one too similar to others. Check the Yellow Pages in your trading area for any conflict in names. But if you can not invent a good name, search the Yellow Pages in cities outside your trading area for a name you like. Most libraries have many out-of-town phone books. Be sure it is not trademarked and is not doing business in your area.
Here are a few examples of well-chosen names:
- Eden's Garden (an apple orchard)
- Frameworks
- Gentle Dental (children's dentist)
- Nice As New (Resale shop)
- The Needle Case
- Mister Fixit
- Kelly O'Kennel
- Kitchen Solvers
Recently, I saw a truck with one of the cleverest names ever. It is a refuse hauling company. In bold letters about one foot high was this name:
1-800-Got Junk
Q. Should I register the name?
A. Yes, for a sole proprietorship or partnership with the County Recorder where you will be doing business. If your trading area is more than one county, register in each. It is not legal protection, but you will have more right to stop another business from trading on your good name. In case you would have to take legal action, the date you first used your name in commerce will be important. The registration date with the county recorder will help substantiate your claim.
If your business is a corporation, you must file incorporation papers with the Secretary of State. That would automatically register your name for the entire state. Again, it would not afford you legal protection, but does establish the date you filed. The Secretary of State will not accept name registrations for a sole proprietorships or partnership.
Q. I can't afford to increase my advertising budget. How can I increase sales?
A. Most businesses fail because of poor marketing. Build a good image and the customers will come. Here are five keys to better marketing:
- Target the right people. Almost every product or service has a target market. It's called the 80/20 rule. 80% of your business may be coming from only 20% of your customers. Identify who they are and zero in on them. It's easy to get overly ambitious and target everyone within your reach.
- Concentrate your efforts. Somewhat related to the first key, many young businesses try to sell in too many markets. Concentrate on establishing one market solidly before venturing into others. If you have a store-front business you need to develop a good customer base before you use your time selling on the Internet, or by direct mail or telemarketing.
- Trial-run any major promotion. Before you sink serious money in a marketing campaign, test it first. Send out 500 mailers before you commit to a large quantity. You may want to drop the promotion if the trial is not successful or at least change it. Conversely a good response on the trial is a signal to go full steam ahead. For newspaper advertising try different sizes to see if there is any difference in the response. Try different specials to see what works best.
- Give the right impression. View your place of business from the customer's perspective. You could be giving the wrong impression. On the outside ... is your sign fresh and legible, are the windows clean, is the building in good repair? On the inside ... is it well lighted, is the merchandise orderly and not shop-worn, is the interior bright and cheerful?
- Adjust your approach. Just because you open up a business, you can not sit back and wait for customers. This is particularly true if you have a service business, or a specialized product. Potential customers may not know you exist. Start going out to the market and talk to potential customers, educating them on what you can do for them.
Q. I have a small business and can not find help. How can I compete against the large companies who offer extensive benefits?
A. Here are several methods for hiring and retaining good employees:
- Referral by current employees. First of all your current employees have to think your business is a good place to work. Ask them to recommend friends and relatives. Give them a substantial reward if you hire someone they recommend. Cash is always welcome, however something like a weekend holiday appeals to many people.
- Part time help. Some people do not want to work full time because of family or other interests. Be flexible in your scheduling. Retirees who want to supplement Social Security/ pension are a good source. Others will accept full time hours but only seasonally. I know a lady who loves plants and works at a greenhouse only in the spring. Retail businesses rely on part-time help for the Christmas season. Many come back year after year. A good place to publicize your need is church bulletins.
- Handicapped help. Contact your local social services agency. Some programs will subsidize handicapped persons wages. Experience has shown they are a loyal group because they are grateful to have work. Also their absentee rate is lower than regular workers.
- Temporary help. Most every city has one or more for-profit agencies that can supply temporary help for nearly every job. Many are local agencies. In metropolitan areas there are branches of national companies such as Kelly Services and Manpower. Others specialize in a field such as accountants and nurses. In a crunch temporary help can be semi-permanent until you find employees to put on your payroll. Many companies end up hiring the temp full time. If you do, the agency contract will require you to pay a finder's fee.
- Student interns. A high school or college student interested in business would be thrilled to get hands-on experience and be paid for it. You must give them meaningful work that will advance their studies. You might ask an intern to develop a marketing plan or include them in management tasks. If you are concerned about training future competition, keep in mind most students will go on to college with larger ambitions.
- Outsource tasks. Try to assign staff work to outside sources. There are accounting and book keeping companies who specialize in small clients. Most do their work off your business premises. They are ready to handle as many or as few tasks as you choose. Some of the more common are paying invoices, payroll, tax matters, and profit and loss reports. Many banks have payroll services. You may also be in need of janitorial, delivery, or repair services.
Q. What is the difference between State Sales Tax and Consumer Use Tax?
A. We are all familiar with the sales tax because we pay it so frequently. It is collected by the seller at the time of the sales transaction on taxable goods and services. Consumer Use Tax, on the other hand, is imposed after the sale takes place and is paid by the buyer of taxable goods and services on which taxes have not previously been paid. In most states, these are purchases made from an out-of-state supplier not collecting state tax, and that are for use in-state.
Here are some examples of purchases subject to consumer use tax:
- A business purchases furniture and office supplies from a vendor in another state who is not registered to collect state sales/use tax.
- An in-state doctor who makes an untaxed out-of-state purchase of an exam table owes state consumer's use tax. An in-state individual who purchases clothing or stereo equipment, or jewelry through a mail order catalog and does not pay state sales tax to the mail order company, owes consumer's use tax to the state.
- An in-state resident who sends jewelry or watches out of state for repair will owe consumer's use tax on the repair costs-both materials and labor. Jewelry and watch repairs are subject to state sales tax.
Q. Why don't all out-of-state businesses collect use tax for other states?
A. If an out-of-state retail business has a physical presence such as a store, warehouse, or sales staff in -state, it is required by law to register and collect state tax. Mail-order companies and others who actively solicit orders in-state but lack physical presence in the state are not currently required to collect state tax. Businesses say collecting tax for 50 states, almost all with different tax laws, would be costly and time consuming.
When tax is not collected it does not mean that no tax is owed. The consumer is expected to report and pay Consumer Use Tax owed to the state for goods purchased and received from out of state if the out-of-state business does not collect it. In addition, businesses surreptitiously use this policy as a sales tool to "save you money" by not paying tax. You probably have experienced when shopping in person in another state you have to pay the local sales tax or have the merchandise sent. In many cases the postage and handling fee are higher than the local tax.
Q. What about sales tax rules on Internet sales?
A. These are presently treated as Consumer Use Taxes when the retailer does not have a physical presence in the purchaser's state. Obviously all states would like to have sales tax collection mandatory on sales across all states. However, many congressmen are opposed and are considering legislation making all Internet sales tax free. One must question: Is there really any difference between catalog mail order and an Internet sale?