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Customer complaints – turn them into sales

December 15, 2004 By Christoph Puetz Leave a Comment

Turning customer complaints into Sales

Complaints offer companies an amazing insight and the chance to improve their services. However, many companies do not at all value them as much as they really should, and many try to avoid receiving them. Complaints shed light on where your company might fall short and where you could excel. Negative feedback can be used as a driving force behind product and service enhancements, new offerings, and outbound sales and marketing campaigns. Analyze each situation carefully.

You can never eliminate customer complaint. If you are running a business – no matter of what size – you will have at one point customers complaining. Some mistakes will happen regardless of how carefully you try to prevent them. Expect to get a few complaints periodically. It’s part of operating a business. But – you can and should plan for complaints. Proper planing will help you to make the best out of customer complaints. Always handle customer complaints with a positive attitude. Smile while talking to the customer on the phone or when you write an email. It does not matter if you are responsible for what happened or if the customer made a mistake and blames it on you. Make your customer happy now and he will reward you with more sales later on.

Surprise your customer with a fast response to his/her complaint. If you can’t solve the problem right away, make sure that you keep a good level of communication alive. Nothing bothers people more than the feeling of being ignored – especially in touchy situations like this. The longer a customer has to worry about getting the problem solved, the less likely he will accept a solution and remain your customer.

Grade the level of the complaint. If you did screw up – fix it. Don’t have the customer be responsible for your mistakes. Let the customer know that you made a mistake and what your plan is. Let him know what you learned from the situation and what you will do to prevent future situations from happening. If it is the customers fault, decide if it is worth keeping this customer. If the customer has never represented a problem and does not seem to be a troublemaker, it is well worth to keep him and to make him happy – if the price is reasonable. Don’t just only look at the short-term, but also consider the mid to long term.

You have decided to solve the issue and to take the blame. Congratulations. Take responsibility for resolving your customer’s complaint even if the problem was not your fault. Apologize for the inconvenience to the customer. Briefly summarize the situation and explain the cause of the problem. Don’t lie. But – good wording can help you here. Explaining your mistake in proper wording can still describe you as a person who knows what happened and still is in control. Don’t be blaming someone else for the problem. It sounds like a cheap excuse.

Now it is time to make the winning move and to turn this customer into a person creating referals for your business. Surprise him by solving the problem AND by giving the customer something extra to compensate him for the inconvenience. This will put the customer in the situation of having something received for free. He feels obligated and honored. He will feel he came out of the situation with a great deal at his hand. This helps the customer a) to forget about the initial problem he had and b) instead, he will remember the special attention you gave him when being asked about your services.

Follow-up with the client after a few days and again after a month. Make sure that the client is happy. Of course – make sure that if you caused the problem, that it won’t happen again. You might not have a second chance and the market out there is brutal. Your competitors are just waiting for your mistakes.

While others just move on after get a complaint out of the way, you should take the time write everything down. It could be just some sort of a journal or a professional complaint database software that you purchased. Keep track of every complaint and come back frequently to revisit each item. Make sure that you are not falling short of avoiding similar situations. Proper handling of a touchy situation, can result in increasing sales and higher customer satisfaction.

Funding & Financing

December 9, 2004 By Christoph Puetz Leave a Comment

Funding & Financing

Even if a web hosting business can be started on a shoestring in some cases – proper financing gives you a better start and better chances to make it through the first 2 years. As you probably know – most startup businesses do fail within the first 2 years of their existence. You do not want to be one of them.

There are several ways for you to get financing or funds to start your business. The most common ones are

– Money from savings and your existing job income
– Bank loan
– Venture Capital

Often an entrepreneur uses existing funds to start a business. Money taken from savings accounts or from other financial sources of yours, are the best way to start your business. The only person you owe money, would be yourself. Nobody can require you to do this and that different from how you would like to do it. If you still have a job while starting your business – finance your business with the income from your job until you are ready to make the final step.

Startup businesses without a credit history will have a hard time to get a credit card or a loan from a bank. If you as a person have good credit, you might be able to get the loan as an individual. Keep in mind – in that case your personal assets are basically securing the loan. Depending on the amount of money – this can be risky. And as you know – banks are not hesitating to close the loan and hand it to a collection service if they feel their loan at risk because you are not making your payments. Not a good feeling. A bank loan also puts a higher pressure on you to succeed. While some people have no problem handling this additional pressure, others do have a problem with it. If you know that you are one of these individuals – do not take out a bank loan to start your web hosting venture.

Venture capital – Unless you are having really big plans, you will be locked out from receiving venture capital from one many venture capital providers out there. Don’t even try and waste your time. These people do not fund small businesses where the ROI would be minimal for them. But – there is venture capital out there, that will be available to you. Often even for less cost than what you would have to pay somewhere else. Family members, friends, coworkers and business partners are all potential sources of venture capital to help you start or to expand your existing small web hosting business. The key is approaching them the right way.

Draft the terms of your loan and review your payment schedule.

How much money do you need to borrow?
What fair interest rate would you be able to offer?
Instead of paying interest – can you offer a share (e.g. 5%) of the business? Or maybe you do not take a loan – you offer an investment opportunity?
When will you start repaying the loan, and over what period?

Identify potential lenders and investors.

Think about all people you know who might be in a position to lend you money or who might be interested in investing into your business. It could be a relative, friend, associate, just about anyone you know and trust. Prepare your proposal the same way you would if presenting your proposal to a bank or a real investor. You are asking for money – so, make sure your request looks legit and professional. Offer a fair deal and the necessary respect. Remember – in the moment you ask, you need to convince your family (just as an example) that you are not that 25-year-old college dropout, but a businessman/woman who was an exact idea of what he/she wants.

You can email your loan proposal to them along with a custom message. But – that should only be done if they live far away and you cannot drive over to the person you are asking. Also – do not surprise them just like this. Call upfront and make an ‘appointment’ where you would like to discuss something important with them and that you will email them some information before then. Be professional.

If the person you are going to ask for a loan or an investment lives in driving distance – drive out there. Bring enough time and do not start asking the moment the door opens. Be polite, be professional. Explain your idea, present your business plan, and explain why you are there. Explain every step and describe thoroughly what you will do to pay back the investment or loan. Be prepared and also explain what you will do in case of failure. How will you pay back the money if your business model does not work and you end up closing it down? Always put yourself into the position of the person being asked, too. It will help you cover questions and concerns.

The moment of truth – The lender responds to your loan proposal.

The person receiving your loan proposal can respond in one of three ways. He/She can:

Approve your proposed loan terms and accept all your terms. Congratulations – you did a great job explaining what your plan is.

Suggests alternative loan terms: your lender does like your plan, but is not accepting your terms. The lender/investor will make alternative suggestions for the terms of the investment/loan. It is up to you to respond. If you did your homework well, you already prepared a plan B with different terms (better terms for the investor/lender). Don’t feel offended, if being asked to provide different terms. You still did very well and you are almost there.

Rejection of your loan proposal: If this occurs, you should try to find out why they rejected the loan proposal. If it makes sense, you can present a modified proposal that contains different loan terms at a later time. But, to be honest – in 99% of the cases you are better off asking somebody else or to come up with a complete different idea of funding your business with venture capital.

As mentioned already at a different topic – the SBA is providing help and funding. Talk to them. It does not cost you anything to talk to somebody who is there to help.

Buying or Selling a Web Hosting Business

December 9, 2004 By Christoph Puetz Leave a Comment

Buying or Selling a Web Hosting Business

You might come to the point where you would like grow by acquiring another web hosting business or maybe you want to sell your own business and retire from the industry. It is easy to find a buyer and it is also not difficult to find sellers who want to get out. But how do you put a fair value onto a web hosting business? This part of the process is the most difficult step. The seller always wants the highest prices while the buyer only wants to pay a small amount of money. The gap between those two expectations will either make or break a deal.

Here are a few consideration and recommendations about how to determine what a web hosting business is worth and what people are willing to pay for clients.

Clients – what are they worth at all (money-wise) when buying a web hosting business? How do you determine the value? What do you have to keep in mind?

The first thing to consider and to find out – what payment terms are in place for the client payments? Do the clients pay monthly, quarterly, semi-annual, or even yearly? This is important to know, as it will affect your cash flow right away. Imagine you pay for clients that have yearly payments in place. In the worst case you would have to work almost 12 months before seeing any money. Clients with yearly payments in place are much less worth for the buyer compared to clients who pay on a monthly base. If a web host has different payment models in place you should split the clients into groups according to their payment schedule. Then work out a price for each group.

You also have to keep in mind that very often clients do not like change. They will be leaving the new web host very soon after the deal has been closed and the announcements to the clients have been made. From what we have seen – the percentage of this can go up to 15% in some cases – though 5% to 10% is a more reliable number. This should be considered when working out the deal.

Now it comes down to determine – how much are the clients worth?! Common values put on clients in the web hosting industry range from 3 to 9 months of the monthly revenue. In some cases even up to 12 months revenue has been recorded. It really depends on the business model and the quality of the clients. Small business clients are to leave the hosting company less likely than a customer with a personal website.

What else needs to be considered? If you are buying just the clients to integrate them into your business and under your business brand name, you’ll be fine with the model introduced above. But what if you buy the complete business – including the name? Building a brand is a difficult and time-consuming process. Buying an existing brand gives the buyer a short cut. The result is that the business brand name is worth quite a bit. How much is it worth? It depends on each single case. One way to determine the value of a brand name is to see what the expected number of sign-ups per month is. 50 new clients per month on average will give you a good ballpark number. As it is more difficult to get new clients compared to keeping existing ones, the value put on these possible clients is less than the value put on existing clients. A 3 to 6 month value of the expected revenue from this seems to be a fair value to determine the brand name value. But again – this might vary and each case needs to be looked at separately.

If a complete business is being sold, it might include hardware and software licenses. Determine the value of these items per age (especially hardware) and what kind of software licenses you would sell/buy.

Buying a business (not just the customer base) might also bring liabilities. Are there any employees to take onboard? Are there existing contracts with vendors (data center, software, etc.) that need to be served? Determine the outstanding $$$ amount per item. Make sure that the supply cost is reasonable and that you are allowed to buy/sell the contract/agreement. Under normal circumstances this should not pose a problem. But if the cost or contractual agreement is limiting your way of taking advantage of the business this should be considered when making an offer for a business.

How about the terms of the payment when selling a web hosting business? Paying for everything 100% is not a good thing. The seller walks away and you just have to hope that everything will go on as ‘advertised’. A 60% payment when the deal closes gives the seller security to get his money. The buyer also knows that he is not risking 100% of his investment right away. The outstanding amount should be split into smaller payments. Depending on the overall amount of the outstanding money, the time frame for the payment should be split between 3 to 12 months before 100% are paid out. The smaller the amount is, the shorter the time frame should be.

A good way for the buyer to make sure he gets what he is paying for is to keep the seller around for 3 to 6 months. The contract should clearly state that the seller is available a certain amount of time or the outstanding price is not being paid. The seller should also sign a non-compete agreement and eventually a no-disclosure agreement to protect the buyer.

Buying an existing business also requires a good strategy upfront. Would you be integrating the clients into your business or run the new business under its old name? Do you want to move the clients to your hardware and consolidate or leave them where they are? How about support? Does your staff have the skills and knowledge to support the different environment? Do you have staff at all or do you eventually need to hire someone? Would you rather buy one big business or maybe many smaller ones? Consider these things when being in the market for buying a web hosting business.

Google Adwords Guide I

December 9, 2004 By Christoph Puetz Leave a Comment

Google Adwords Guide I

You probably have already heard about the new marketing tool from Google.com on the Internet. Their advertising service is called “Adwords” and allows you use Google.com for marketing. Your ads will be displayed on Google’s website when people initiate a search. Your ads can also be displayed very targeted among many thousand websites that partner with Google in a program called “Google AdSense”. Adwords is the Google.com version of a pay-per-click advertising model. That means users click on your ad and will be redirected to your website or a specific URL that you have selected when creating your ad campaign.

What do you need to know about Adwords? Adwords is a way to spend a lot of money on advertising very very fast. BUT – Adwords is also a way to spend marketing money very selective to a targeted audience. Adwords can be very expensive for the advertiser if not properly planned and tested.

When you setup a Google Adwords ad campaign, you choose certain keywords for which your ad will appear on search results on Google.com. You also specify the maximum amount of money that you are willing to pay for each click. Remember – the Google Adwords program is a PPC (Pay per Click) model and you only pay when someone actually clicks on your ad and hence visits your website.

It is very important to select the right keywords for your business ad. Going with too generic keywords that everyone will not be very effective and very expensive. Play a little bit with the Adwords keyword and campaign settings just to get a feeling how expensive the generic keywords for your business and industry are. You will realize soon that you need to be creative and careful with the usage of keywords.

Google recommends using different spelling variations and plural versions of your keywords to reach the best target audience. This is a good approach, as not every one of your potential new customers will search for a keyword in the same way as everyone else. Some people will use plural versions and others will use singular versions.

Exact matching of keywords in Google user queries requires you to place square brackets around your selected keywords. Example: [web hosting]. Your ad will now only show when users search exactly the phrase ‘web hosting’. Your ad will not show if other words are included in the search string or the words are entered in a different order.

Another keyword matching option is the phrase option. This is very similar to the exact matching of keywords in a search in the sense that the keywords must all be present and in the right order. However your ad will still show up in search results even if other words are present in the search. To make use of phrase matching you must include your keywords in quotes. Example: “web hosting”.

Negative matching is the final option available for your Adwords advertisement. This option allows you to block your ad being shown if a certain word is present in the search query of the Google user. This allows you to reduce the number of possible clicks on your ad in non-relevant searches and therefore to keep your cost low. It also helps you to make sure that your ad is not shown to users who will not be interested in your products. If your keyword is ‘web hosting’ but your web hosting is based on the Linux operating system and not based on a Windows Operating System then by using negative matching you can choose to have your ad not shown for search queries with ‘windows web hosting’. In this case ‘windows’ would be your negative keyword. You simply place a dash in front of your negative keyword to use this option. Example: -windows

Using the here described ways of selecting keywords will help you to be more successful with Google Adwords. Google also allows you be very specific for which geographic area your ads will be displayed. You go from global to country and even state or city specific settings. Especially local businesses now will have it much easier to use Google Adwords for their specific local markets.

Well, you got the idea how to be very specific how you select your keywords and combinations of keywords. But how do you actually select the right keywords? In order to get the most out of Adwords, you must have a list of great keyword and phrases. If your keyword list is not good enough, you will be punished with paying too much for your advertising. Write down the top search terms that you can think of. Ask friends and family how they would use Google to find your product (without searching for the business name itself).

A competitor of Google actually offers a free tool, which will allow you to find out how popular the keywords are that you selected. Find this free tool here and use it for your advantage:

http://inventory.overture.com/d/searchinventory/suggestion/

Create a list of the most popular keywords. Now add words to the actual keywords. Use words that would describe your specific product or service. Now use these phrases or word combinations when setting up a Google Adwords campaign to find out how much you would have to pay per click to get your ad onto the first page on a Google search.

If the keywords selected by you are very expensive to use you should consider rewording or using different combinations. Maybe concentrate on a certain niche to find lower priced keyword options.

When testing new campaigns make sure that you limit your exposure by amount of money you want to spend per day as well as you should set a date / time limit. It’s easier to activate a campaign again if it works just fine for you. If you fail to set limits you might spend lots of money in a very short time – money you can’t get back. It is gone ….

Another way to save money on your Adwords advertising campaign is to wait for the end of the month. It’s funny, but many folks follow a plain rule to start their advertising in the beginning of the month. By the time the 25th of a month is there they have spend most of their money on their campaigns already. For you this means that the prices for many popular keywords might be more affordable for you.

If you are advertising specific products with your ads, link to the specific product page and not to your homepage. 95% of the people who click through to your website will not really be willing to start another search on your website to find the product mentioned in your ad.

Conclusion

Frequently revisit your campaigns and compare prices and results. The Internet is a fast changing environment. What works one day, might not necessarily work the next day. Keep track of everything – maybe create a spreadsheet.

Confessions and Tips from a Top Web Hosting Salesman

December 9, 2004 By Christoph Puetz Leave a Comment

Confessions and Tips from a Top Web Hosting Salesman
 by: Jamie Chantiles

Have you ever gone car shopping with a former car salesperson? Their industry and sales knowledge is powerful information vital to the average buyer. Gaining their street smarts and savvy gives the buyer an edge. This “edge” can be the difference between getting good value and being taken advantage of.

As a former top web hosting salesman, I have decided to come forward and shed some light on the industry. The rapidly growing world of web hosting, domain names, and basic web design is still a mystery to many interested people. My intent is to help you understand basic “do’s and don’ts” in order to help you make a better more-informed decision.

When I got into this business several years ago a close friend if mine had paid $35 for a domain name and had monthly expenses of $20 for simple hosting. By quickly checking the domain name I discovered it was in the hosting company’s name and not the actual owner of the website! I also quickly realized that this $275 annual expense was available at less than $100.

Not controlling your domain name can become a huge problem to website owners even though it is the smallest annual expense. You can be “held hostage” by hosting companies who control your domain name. This is how they keep you paying more than you should monthly, because you cannot leave! Make sure you are dealing with a reputable reseller or actual Registrar when you buy your domain name. Also consider buying the name for 5 or 10 years for $40-$80. If your email address changes or the credit card expiration changes, you can accidentally lose the name and have fines of $200 to get it back. Be wary of free domains and free web hosting, as you still get what you pay for. For more info on the subject refer to DomainInformer.

Not having the username and passwords to access the web hosting accounts is another huge mistake many buyers make. If your web designer turns up missing, and you cannot gain access to the files you bought and paid for, then you cannot leave that web host. This is the most common problem I encountered in my selling names, sites, and design! By the time you realize you are over-paying, you are frustrated because you are powerless. Do not trust anyone to keep this information for you. The relationship may change and you will be glad you are independent, informed, and in control of the situation.

Finally you also need to keep a copy of the files on your hard drive and/or backed up on a CD. This way if the web host loses the files or your designer is MIA you have a backup plan. Be sure the domain name is registered with you as the administrative contact, and that you have all username/password combinations for names and hosting accounts.

When you are a prospect everyone acts professionally, but what about after you are a customer? To be really comfortable with your web host make sure they give a 30-day money back guarantee. Load the files and see what kind of performance and customer service you get for a few weeks. If they promised 24/7 customer care on the 3rd ring and you are getting voice mail or being on hold for 15 minutes… you will be free to leave!

Web hosting is simply space in a computer where your html documents and jpeg. images are stored. Good web design allows for easy navigation through the written words and the pictures you want the world to view. What you need to be concerned with is the speed with which your website loads and the amount of uptime your host claims to give. When traffic is a heavy a slow loading website will frustrate interested viewers, and cause them to leave. In addition the host needs a backup plan for power and Internet connectivity. Many top hosts claim 99+% uptime year round. Get details about top hosts at HostReview.com.

Things to consider when buying web space are as follows: Will you utilize a database for a dynamic searchable site? Are you going to have a store, selling products online in a shopping cart? Are you going to have Unix or Windows based hosting? Do you need a secure site (static IP) needed to enter sensitive information like social security or credit card numbers safely? How much space do you need for large audio and video files, versus pictures and text only? And what is the difference between shared and dedicated hosting?

To answer all the above simply I will paint some broad stokes below. More knowledge about technical info can be found at WebKnowHow.net http://www.webknowhow.net. People are unclear on the differences between shared and dedicated hosting. Most everyone starts with shared hosting as it is more affordable and works fine. In a shared hosting environment, the computer space is sliced up and “shared” among many small sites. Shared hosting ranges from a few dollars a month for a simple site to as much as $30-50/mo if you are selling online. Dedicated hosting usually begins at $59 and can easily reach $200/mo. and more.

If your site ever gets really popular and/or you have many transactions happening you to will move to a dedicated server. Dedicated meaning that all of that computer’s resources are allocated to you alone. If you do not know how to configure the server then you will need technical assistance in the form of an IT employee.

This technical expert will monitor the data center operations; of your hosting company to make sure data is backed up and protected by firewalls. Firewalls protect your computer from being “hacked” into unauthorized people. Another option you may consider is an emerging trend known as “managed dedicated servers”. The host helps to manage the servers daily operation, in order to help the novice operator.

Both shared and dedicated hosting requires a decision between Unix and Windows. This has been compared with people’s preference to Ford or Chevrolet. Some people grow up and get used to one and prefer it for some reason. Others know both and utilize what will be best in each situation.

From the viewer’s perspective, both Unix and Windows look the same. If you are going to use ASP (Active Server Pages) you will need Windows. Unix utilizes PHP instead of ASP, and is generally more stable and affordable. This is because the license fees paid to Microsoft increase the hosting company’s overhead and they pass that on to the consumer.

Many PC users have Front Page design software from Microsoft included as a gift in their original purchase. Unix hosting now includes front-page support for well under $10/mo. So you can utilize design software you already have, and host for under $100 per year.

Dreamweaver is the other popular design software program you should investigate if you are thinking about doing website design. Be wary of friends or relatives who will do the design for free. If they are gainfully employed, the tasks that they are paid for will take priority, which places unnecessary strains on the relationship. More info on web design and search engine optimization can be found at PromotionWorld.com http://www.promotionworld.com/.

We also need to understand the relationship between the static IP address, using a database, and using eCommerce features to sell products online. IP addresses help identify where the actual end user is located physically. This is important if we need to locate to the original sender of a message or a live user creating havoc on the Internet.

Many of us have bought an airline ticket online by now. You may have noticed the screen that alerts you to the fact your connection is secure. This secure certificate assures a computer user that it is safe to enter credit card info and buy without fear of someone intercepting your sensitive data.

The static IP allows authorities and credit card processors to track storeowners and their computers to insure 100% honesty. Most shared web hosting sites share IP addresses as well. This is fine for a simple informational website with just pictures and text.

Dynamic sites are capable of storing your name and user profiles at an initial visit. This allows the site to “recognize” you on a subsequent visit and quickly load the profile for instant access. Dynamic sites also search for products or names in the company’s stored database. Searching for different items quickly and the site saving all your personal information, is a direct benefit of a database.

Most initial sites will not use static IPs or databases unless you are going to be selling online. These stores are referred to as eCommerce web hosting and are the most expensive of all. Monthly charges can easily exceed $50/mo when you consider all expenses of the static IP, payment gateway, merchant account, and shopping cart.

Buyers add items to their “shopping cart”; it totals shipping and taxes and charges your card. Merchant account banks process your buyer’s online purchase, charging 2-3% fee total to send money to your bank. You are then free to ship the product they bought.

My personal website has lots of pictures and text, yet is barely over 50 MB in size. 1 GB (1000MB) of storage, now is available for $10/mo, and has 20 times the storage I need. Large video files such as streaming video and audio are the largest users of space. 200MB and 10 email addresses are going to be as much as many small sites will ever need. Often of you prepay the year you can get a free month or the setup fees waived. Also find a host who pays you to refer friends, and you can get free months that way.

I hope this information helps you better understand the power of the Internet. We are all connected through this World Wide Web, and it is your right to benefit in every way possible. Come on, jump in, the water’s fine… 

About The Author

Jamie Chantiles is Director of Sales for DevStart. He has been featured in magazines and on TV as an expert in peak performance. His speciality is in increasing productivity and attaining peak performance by harnessing the power of your own brain. Jamie has worked in the web hosting industry, selling and training for the last 2 years. Read more stimulating, probing and revealing articles on HostReview (www.hostreview.com).

jamie@devstart.com

The True Cost of Self-Employment

December 8, 2004 By Christoph Puetz Leave a Comment

The True Cost of Self-Employment

Now you think you are ready to make that jump and go from being an employee to full self-employment? The profit from your part-time (up till now) business is already matching your normal paycheck. You think it’s the time to fire your boss now and make a living without that paycheck from your employer.

Before you take that final step to personal freedom, make sure you really understand what you are giving up in that moment. Do you know that your employer paid benefits that may cost you more than you realize if you have to pay for them yourself. For most people it will take much more than $50,000 of profit per year to replace a $50,000 annual salary from a job. On average an employer pays 25% – 35% on top of your salary for your benefits (this number may vary for businesses with less than 50 employees).

When we talk about that your employer pays for the benefits we’re not referring to the “free” office supplies, subsidized or free soft drinks, coffee, or tea, or even the occasional free meal at the holiday party. The items that you need to think of are the benefits that are going to cost you the most money. We are talking about the employers part on your health insurance premium, unemployment, life insurance, 401K, and so on. So, to make up for all those things your $50,000 salary suddenly needs to be around $65,000+ per year.

Based on the US Chamber of Commerce’s survey medical insurance cost approximately 15% of an employee’s salary. However, employers also cover the cost of many other forms of insurance. They include

-Dental
-Vision
-Health
-Life
-Disability
-Unemployment
-Long Term Care Insurance
-Workers Compensation

You might be thinking that you pay premiums for these products already. Even if you do, your employer is most likely paying the bigger share of the cost. Not to mention that many times the premiums you are paying are using pre-tax dollars. This means you end up paying less in taxes because the amount of your premium is deducted prior to calculating your taxable income. Also keep in mind that the cost for health insurance has been going 10% per and more for the last 4 years. A number that is most likely to stay in the double-digits.

When you own your business not only are are you going to be responsible for the full cost of all forms of insurance using after-tax dollars, you are going to be responsible for self-employment taxes, too. Self-employment taxes include the employer paid portion of Social Security and Medicare taxes. This means your bill for these taxes will most likely double. Instead of paying 7.65% of your income for these, you will now pay 15.30%.

And don’t forget about having to pay estimated taxes. You will have to file and pay taxes 4 times a year now, instead of just once per year. Keep in mind that not paying taxes properly in advance will eventually come back as a boomerang in form of late fees and penalties. Not only do your taxes increase so do the headaches and the cost of filing! If you have not yet an accountant – it is time to think about this more closely.

If you have received an employers match to your 401K – this money will have to come out of your own pocket now. You might not even be eligible for a 401K and have to look into different forms of retirement accounts. A big learning curves lays ahead.

These are only a few of items that make up the 30 – 40% of your salary that will suddenly show up when you become self-employed. Then there are things like discounted shopping at car dealerships, banks, or certain stores. If you highly depend on these perks – keep this in mind and budget those numbers properly.

I hope you don’t think we are trying to discourage you from finally doing the big step to become self-employed. But this last step requires a little more than just walking into the boss’s office and slap him with your letter of resignation. 😉

Good Luck

Quick Start Check List

December 8, 2004 By Christoph Puetz Leave a Comment

Quick Start Check List

Are you on the fast track? Are you in a rush? Starting a business requires time and thorough work and research. But in the end it is good to have a quick checklist handy to make sure that you are not missing anything major.

Small things can be fixed while you go, but major things should be taken care off before they become a problem.

We have setup a quick start checklist so that you can easily compare your operational status against the list. In some cases this will give you the chance to re-visit items and make corrections. We hope that on the other side, this list will give you the peace of mind that you have covered your bases.

1) Find a company name not trademarked or taken already

2) Find a matching domain name for your business

3) Register your business with your state and local authorities

4) Open a bank account. Deposit startup funds

5) Decide which services and what hosting packages to offer. Design packages

6) Sign-up for a domain name reseller account.

7) Find a reseller web host or lease/rent/buy a server with a web control panel included or as add-on

8) Build/Design a website. Implement domain name reselling except billing and credit card processing

9) Sign up for a credit card merchant account or 3rd party credit card processing provider

10) Purchase a SSL certificate

11) Decide if you are building your own tools for the sign-up process or if you rather purchase a billing/account setup software. Purchase software as necessary.

12) Implement SSL and credit card processing into your website

13) Design and order business cards

14) List your website with search engines

15) Setup a helpdesk and create a support section with tutorials and FAQs

16) Have friends or family members test your website for complete functionality

17) Design a marketing campaign and decide on where to do marketing. Prepare marketing efforts. Check for deadlines with publishers.

18) Fix problems found by testers. Test drive website for functionality yourself

19) Hire staff and/or make preparations for customer support (remote email solutions, cell phone, etc.)

20) Setup an accounting solution; hire an accountant, or make other preparations for your bookkeeping

21) Kick off marketing campaign and officially open for business

Business Plan – Extended

December 4, 2004 By Christoph Puetz Leave a Comment

Business Plan – Extended

A business plan defines your business, identifies your goals, and serves as your company’s resume. The main components include a current and future (pro forma) balance sheet, a current income statement, and a cash flow analysis of your business. This will help you to allocate business resources properly, to handle unforeseen events, and to make good, solid business decisions. Because the business plan provides specific and detailed information about your company and (as an example) how you will repay a loan, a good business plan wil be a crucial part of any loan application at a bank. Additionally, it will inform your sales personnel, your suppliers, and other 3rd parties about your operations and business goals.

The importance of a comprehensive, detailed business plan can’t be overemphasized. Many important things depend on it: external funding, credit lines from suppliers, management of your operations and finances, promotion and marketing of your business, and finally achievement of your goals and business objectives.

If you are tempted to start a business without having a business plan, you will be very likely in trouble running a successful operation. A business plan is like a blue print of your business. Imagine a builder who starts building your new house without having a blue print. Writing these things down, is not the most fun event a new business owner wants to do. Make sure you spent the time and research to create a solid business plan.

Before you begin writing your business plan, consider four important questions:

What service or product does your business provide and what needs does it try to fill?

How will you attract your potential customers?

Who are the potential customers for your products and/or service and why should they purchase it from you?

Where will you get the financial resources (cash, loan, etc.) to start your business?

How does a business plan looks like?

1. Cover sheet
2. Statement of purpose
3. Table of contents

-> The Business
A. Description of your business
B. Marketing Strategy and Plan
C. Who is your competition
D. Operating procedures
E. Personnel / Staff
F. Business insurance

-> Financial Data
A. Loan applications
B. Capital equipment and supply list
C. Balance sheet
D. Breakeven analysis
E. Pro-forma income projections (profit & loss statements)
Three-year summary
Detail by month, first year
Detail by quarters, second and third years
Assumptions upon which projections were based
F. Pro-forma cash flow

-> Additional Documents
– Tax returns of principals for last three years Personal financial statement (available at your local bank)
– For franchised businesses, a copy of the franchise contracts and all supporting documents provided by the franchisor
– Copies of letters of intent from suppliers, etc. (if available)
– Copy of proposed lease contract or purchase agreement / contract for office space
– Copy of all business licenses and other legal documents (if related to the business)
– Copy of resumes of all principals / company officers

If you start a new business and do not have financial data going 3 years back, you can substitute this with solid statements of your current situation. Described above is the ideal case – adjustments need to be made if necessary. Be detailed – it’ll be to your own favor. Ask your bank so that you can work with their small business specialists. Regular tellers might be friendly, but you want to make sure that you get decent information.

What makes a good business plan?

Is it the length of a business plan? The information it contains? How well it is written, or the brilliance and excellence of the strategy it describes?No.

A business plan will be very difficult to execute unless it is simple, very detailed, realistic and complete. Even if the business plan has all the items listed, a good business plan will need someone to follow up with and check on it, too. The plan also depends on the human elements it’s build on, particularly the process of commitment and involvement.

Successful implementation for your business starts with a good business plan. There are several elements that will make your business plan more likely to be successfully implemented.

Is the plan simple and easy to understand and to act on? Does it communicate its contents easily and practically and is it making sense?

Is the plan specific and detailed? Are its objectives concrete and measurable? Is the plan realistic? Are the sales goals, the expense budget, and milestone dates realistic? Nothing prevents implementation more like unrealistic business goals. Can you achieve your set goals?

Is the plan complete at all? Does it include all the necessary elements to be successful? Requirements of a business plan may vary, depending on the actual context. There is no guarantee, that the plan will work as planned if it doesn’t cover the main bases.

Preparing the business plan has to be an organized, logical way to look at all of the important aspects of a business. Don’t use a business plan to show how much you know yourself about your business. Nobody will read a long-winded, too detailed business plan: not your bank, nor venture capitalists. Years ago, people were favorably impressed by long business plans. Today, nobody is interested in a business plan that is more than 40 or 50 pages long. Don’t waste your time and the time of others by writing a book. Write a business plan that impresses and that is short-while.

Do I need a business plan if I’m not seeking financing?

For your small business to succeed, you need to know where you’re going and how you’ll get there. Creating a business plan forces you to set your own goals, determine the resources you will need to execute your business plan, and to foresee problems that might otherwise broadside you and would prevent you from being successful.

If your business plan is not being used to solicit funding you can create an informal plan only, that serves primarily as a planning tool for yourself and a tool that will keep you on track. An informal plan can also be used to be shown to potential business associates and partners.

How do investors and bankers read a business plan, and what do they look for?

Don’t expect every person you will give your business plan to read it thoroughly. In fact, you really can only count on them to skim it. Investors and bankers know what they’re looking for in a business plan – they want to see a business that will grow rapidly and someday return a handsome profit. Bankers want to see a business that will be able to pay off the loan they are granting. Venture capital firms, for example, expect to receive an average of five times their original investment within 5 to 7 years.

Keep in mind that investors rarely put money into a “product” — they invest in a business. Many great products have floundered because the inventors did not understand how to get people to buy them. So be sure to show that you understand how to market your product or service. If your banker does not understand your business model, he will not grant you the loan you are looking for.

How long should my business plan be?

30-40 pages should suffice. Anything longer than that and you risk alienating a potential investor, or you force them to skim through the document rather than read it. You won’t be impressing anyone by creating a 200-page document – what’s contained in the plan is much more important than how long it is. The more concise, detailed, and readable your business plan is, the more focused your business will appear. Focus on those details that tell your business’ story, that set you apart from your competition, that make your business appear to be a good, solid financial investment, and that show you will be profitable.

With the fast changes taking place in industry and society, how can a business plan be helpful if it is quickly outdated?

A well written and researched business plan will not only prepare your company for today’s business and market conditions but tomorrow’s unforeseen events. All business plans should have a contingency section to accommodate for the future. Your business plan is a plan that will not just sit on the shelf for 12 months but will always be updated when new market conditions or strategic changes take place. Plan your changes thoroughly. Running a business requires patience – making changes too often and to fast might result in your business going down faster than you can re-write your business plan.

Do the readers of my business plan need to sign a non-disclosure agreement?

A non-disclosure agreement can raise red flags with your intended audience. A seasoned banker or investor is bound by client confidentiality and may find a NDA insulting. Secondly, if the business needs to protect its ideas and concept at this stage of the game than there may not be any barriers to entry for others to enter the market. A simple confidentiality clause at the front of the plan should suffice. If you are selling your business or if you are seeking a strategic alliance/partnership, a non-disclosure may be necessary. If in doubt, consult with your lawyer.

Business Cards – extended

December 4, 2004 By Christoph Puetz Leave a Comment

Business Cards

Business Cards can be an important marketing tool – if done and used right. Put them to use wherever you can. A business card can be a very effective marketing tool when doing offline marketing. But there some “Do’s” and “Don’t’s” to keep in mind when working with business cards to promote your business.

Design: White business cards with just black printing on it, are completely out. They look boring and are not a good tool to have somebody really look at it. When you design your business cards, make sure that there is something on it that will have the person you give it to look at the card. Exciting scenerys/landscapes or something related to your business or industry are options for use on the background of a business card. You could also have your own photo printed onto the business card. It’ll be different from what most people have seen in the past and therefore might stick to their mind = remembering you and your business. Only when people look at the card, you eventually get the message delivered.

Content: Do not overload the business card with information. The business card needs to have your basic business information and some sort of hint of what your business has to offer. If you’re a web host, you can have your business name printed on the card + “Web Hosting” or “Web Hosting Provider”. The business card should also show your company slogan/marketing message printed on it – if you have one. If you have a good 1-line slogan/marketing message that is sticky and worth to remember – put it on your business card. The same is true for your logo. If your business logo catches attention – put it on your business card. If it is not sticky or you don’t have one – use something else that catches the attention. A great, exciting looking background on a business card is an effective way to catch the attention of the person you give it to.

Add value to a business card, so that people keep them in their wallet or somewhere else where they will take it into their hands quite often. If your town or city has a well-liked sports-team – get the game schedule printed onto the business card back-side. Fans will keep them handy and therefore your business name will be around and visible. Another option is to print a coupon onto the backside of your business card. People who are interested in your services or products, will keep them around until they decide to use the coupon. Make sure the coupon is not limited in time to use it – imagine you still have 500 business cards left – with an expired coupon printed on the backside.

When to use business cards? Give them to customers whenever you can. If you send out letters, invoices or estimates – attach your business card to the letter. Give them out at church, seminars, meetings. Post them at bulletin boards at supermarkets or community related places. Leave 2 or 3 in the locker room at the gym everytime you go there.

Keep them handy so that you can give them out at any time. Keep a stack of business cards in your car or truck, your briefcase, your wallet, in your planner, at home, anywhere you can think of and where you eventually have a chance to hand one to somebody. Another good thing you can do with your business card is not only carry it around with you, but have other people (friends, family) carry it around and pass them around for you. If you have employees, don’t be cheap – get business cards for them, too. In most cases employees will get more self-esteem of having business cards (makes them feel valuable and accepted) and they will use them. This will get your business name out to even more people. If you attend seminars, or tradeshows, make sure to drop your card in a “fish bowl” or card collection box. The same is true for restaurants who offer a free lunch for one of their customers from the pool of business cards dropped into a bowl. When you put your card into the bowl – place it manually on the outside – eventually visible for other folks.

If you print them yourself – make sure they do look professional. If they make the impression that they are home-made and cheap – don’t do it. Having them printed at a professional printshop, will give you the piece of mind that they will look good and professional. In most cases it will be cheaper, too. Make sure the quality is good – no matter if you print them yourself or have them printed. A non-durable business card will make a bad impression. Make sure the readability of the business card is given. If it is too hard to read your card because of small font size, nobody will really read it.

The old myth of “Place some on the table when you leave a restaurant. ” is a waste of your resources. First of all – in every restaurant the tables will be cleaned before the next guest will be seated. The person who usually cleans the table is probably not your target group at all. Those are low wage jobs and these poor souls have different concerns. Rather check with the restaurant manager to see if you can leave a couple near the cash register.

“The Web Hosting Resource Kit” recommends http://www.vistaprint.com and http://gotprint.net for business cards.

Mission Statement

December 3, 2004 By Christoph Puetz Leave a Comment

Mission Statement

Every organization or business has a mission, a purpose, a reason for being. The mission statement should be a clear and succinct representation of the company’s purpose for existence. It should incorporate socially meaningful and measurable criteria addressing concepts such as the moral/ethical position of the company, the public image, the target market, products/services, the geographic domain and expectations of growth and profitability. At the very least, your organization’s mission statement should answer three key questions:

– What principles or beliefs guide our work?
– What are the opportunities or needs that we exist to address?
– What are we doing to address these needs and opportunities?

A Mission Statement should be a one-sentence/two-sentence, clear, concise statement that says who the company is, what it does, for whom and where.

The intent of the Mission Statement should be the first consideration for any employee/business representative who is evaluating any strategic decision. The statement can range from a very simple to a very complex set of ideas.

A Mission Statement can be changed over time. It does not have to be static. It is actually good to revisit the Mission Statement over time and to adjust it to the different times in society, culture and business.

Here are some Mission Statements of other companies and organizations:

Mary Kay Cosmetics
“To give unlimited opportunity to women.”

Food & Drug Administration
“The FDA is responsible for protecting the public health by assuring the safety, efficacy, and security of human and veterinary drugs, biological products, medical devices, our nation’s food supply, cosmetics, and products that emit radiation. The FDA is also responsible for advancing the public health by helping to speed innovations that make medicines and foods more effective, safer, and more affordable; and helping the public get the accurate, science-based information they need to use medicines and foods to improve their health.”

North Carolina – Secretary of State
“To serve and protect citizens, the business community and governmental agencies by facilitating business activities, by providing accurate and timely information and by preserving documents and records.”

Sun Microsystems
“Solve complex network computing problems for governments, enterprises, and service providers”

Walt Disney
“To make people happy.”

So, from these different kind of Mission Statements you can see that most of the items mentioned above have been implemented in one way or the other. Make sure your business has a Mission Statement that you can identify yourself with. Make sure your employees know your Mission Statement and understand the purpose of it.

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