News

Check out CrowdPitch on 10/28

2010-10-27T06:45:00.000-07:00

Funding Universe's CrowdPitch event gives five entrepreneurs the chance to pitch their business ideas for four minutes, in front of a live audience and a panel of experts, who then provide feedback after which the audience chooses a winner. Anyone looking to learn the best practices to obtain funding from investors would benefit from being a spectator in the audience for the CrowdPitch event.

If this sounds like fun, get to The Grand Room of The New York Open Center, at 22 East 30th Street from 11:30am - 1:30pm on Thursday, October 28th. I'd be going to check it out myself, but I have some prior meeting commitments. And how's this for a pitch? Admission is free, including a free lunch.

Q4 '08 Venture Capital Fundraising Drops to $3.3 Billion

2009-02-15T04:37:00.000-08:00

According to the National Venture Capital Association, 43 Venture Capital funds raised $3.4 billion in the fourth quarter of 2008, down sharply from both the previous quarter amount of $8.4 billion, and the fourth quarter of 2007 ($11.7 billion). Mark Heesen, president of the NVCA, said he expects the slowdown to continue well into 2009, until economic conditions improve, and institutional investors can "recommit with confidence."

What Can the Movies Teach Us About Finance?

2009-01-06T12:39:00.000-08:00

When I was asked by The New School to teach NMGT2133 "Introductory Finance for Business", I had the inspiration to use excerpts from movies and television to reinforce some of the class learning objectives. It seemed like a "no-brainer"; many of my students would be media majors, so this would be a great way to bridge my world and theirs.

Finding suitable films and tv shows to quote for this purpose has proven somewhat more difficult than I expected. An MSNBC survey article, "The Top 10 Business Movies," gives some perspective why. In this unscientific 2004 poll, 74% of responders cited the side-splitting film, "Office Space" as their favorite "business-themed" film, followed by "Godfathers 1 and 2", and "It's a Wonderful Life." Finance may be the lifeblood of business, but as a group, the 10 choices given to MSNBC readers depict the struggle to succeed in business from a comical, sentimental and suspenseful standpoint, while doing little to educate viewers on financial concepts.

Fortunately, I was able to find some great choices, including the Million Dollar Idea episode from "The Lucy Show", "Wall Street", "Other People's Money" and "Lost in Lamancha."

The course is open to the general public as a continuing education offering, meeting Mondays at 4pm, with the first class on 1/26/09. Or if you are interested in some recommendations, on finance-related books, try some of these:

"Finance for the Non-Financial Manager", by Gene Siciliano
"When Genius Failed", by Roger Lowenstein
"Buffet: The Making of an American Capitalist", by Roger Lowenstein
"Barbarians at the Gate", by Bryan Burrough and John Helyar
"Optical Illusions: Lucent and the Crash of Telecom", by Lisa Endlich
"Disney Wars", by James B. Stewart
"Den of Thieves", by James B. Stewart
"Stocks for the Long Run", by Jeremy Siegel
"Capital Ideas Evolving", by Peter Bernstein
"Liar's Poker", Michael Lewis

How Long a Recession?

2008-12-11T06:22:00.000-08:00

Thanks to economist John Dunham of John Dunham & Associates for putting the current U.S. economic situation in a historical context:

The last time the country experienced a serious recession was in 1980-81 when the economy contracted by 1.5 percent. This compares to our projection of a 1.2 percent decline for the current recession. This extended period of strong economic growth and very shallow and short recessions, has created an environment where many of those working in finance, the government and the media expect the same thing to continue indefinitely. During times like this it is good to remember what the pundits were saying in 1982, the last time the US experienced a true recession. Commentators during that period screamed that the US was entering an "economic Dunkirk," and that we would be fighting economic stagnation for the next decade. The Dow Jones Industrial Average fell by 24% (to a low of 777), unemployment rose to a high of 10.8 percent, and states throughout the country experienced large deficits. Companies that were too big to fail like Bethlehem Steel shuttered plants throughout the country and there were more bank failures than any time since the great depression. In addition, the country was in the throes of the Savings & Loan Crisis which was also brought on by a fall in home prices. While Carl Sagan's "Cosmos" topped the New York Times' Bestseller List in 1981, other titles like "The Coming Currency Collapse" (Jerome F. Smith) and "Crisis Investing: Opportunities for investing in the coming Great Depression" (Douglas R. Casey) echoed the concern surrounding an economy in recession. As pundits and politicians decry the end of capitalism and suggest that today's situation is some unique event unseen since the early 1930's (when by the way, the economy shrank by 45 percent and unemployment approached 25 percent of the workforce) it is important to keep everything in context. Capitalism is not dead, markets continue to function, and new firms, and new industries will emerge from the creative destruction brought about by the recession of 2008.

How Does Your Company's Profitability Stack Up?

2008-12-08T17:31:00.000-08:00

Suppose you are a retailer with $600,000 annual sales, what would be a normal amount to expect to achieve in annual gross profit? In net profit? Inc. Magazine's November issue includes a profitability calculator, based on surveys of key financial metrics for 19 different industries by Sageworks, in partnership with Inc Magazine. The retailer mentioned above would have annual gross profit of $192,000 and net profit of $16,200, based on typical gross profit margins and net profit margins for retailers of 32% and 2.7% respectively. For those interested in a survey of private company profitability with even more granular data, and willing to pay for it, try Annual Statement Studies, published by the Risk Management Association.

Starting a Business in a Bad Economy

2008-11-18T17:16:00.000-08:00

Is a bad economy a good time to start a new business? Maybe so, according to a 11/18/08 Marketplace report, broadcast by American Public Media. Resources are less expensive and available, such as highly skilled workers and consultants. Investors who have been burned by the stock market, might be looking to invest in new ventures. And at this point, with consumer sentiment and purchases in a trough, you can plan for the worst, and hope to be pleasantly surprised if the economy improves in 2009/2010.

Financial Bail-Out News Quiz

2008-10-04T15:06:00.000-07:00

It's been a momentous two weeks of business news, leading to the Federal Bail-Out bill being signed into law yesterday, October 3, 2008. How many of the following news quiz questions can you answer correctly?

1. How much is provided for in the Federal Bailout bill?
a. $7 billion
b. $70 billion
c. $700 billion
d. $7 trillion

2. What department of government will have primary responsibility for administering the bailout?
a. Treasury
b. Interior
c. Federal Reserve
d. Homeland Security

3. What did the stock market (i.e., Dow Jones index) do the day that the bailout bill was signed into law?
a. Up 778 points
b. Down 778 points
c. Up 157 points
d. Down 157 points

4. What unfavorable economic news was reported the same day as the bail-out bill was signed into law?
a. Record U.S. trade deficit
b. Oil prices back up to $120/bbl
c. Very unfavorable jobs report
d. U.S. economy officially in recession

5. Which financial institution was not offered a Federal bail-out in time to avert its bankruptcy?
a. Freddie Mac
b. Fannie Mae
c. Lehman Brothers
d. AIG

6. Which politician made a speech in March of this year "tracing the sub-prime crisis to lax oversight, and calling for a major overhaul of regulatory policy?"
a. George W. Bush
b. Barack Obama
c. John McCain
d. Michael Bloomberg

7. What led General Electric to sell $3 billion of convertible, 10% preferred stock to Warren Buffet?
__________________________________________________________________________________________
__________________________________________________________________________________________

8. What accounting provision, in conjunction with the sub-prime crisis, has led to weaker bank balance sheets?
a. Accounts receivable aging
b. Accelerated depreciation
c. Pooling of interest
d. Mark to Market

9. Which perk was not rolled into the bail-out bill that Congress eventually approved?
a. Extended mortgage forgiveness for homeowners
b. New/extended tax credits to promote reduced energy
c. Increased tax credits for real estate developers
d. Middle-class protection from alternative minimum tax

10. For each of the acquired, or to-be-acquired banks (a, b, c, d), match it to an acquiror, choosing from 1, 2, 3, or 4. (This one is tricky!)

a. Merrill Lynch
b. Washington Mutual
c. Countrywide Financial
d. Wachovia

1. Citigroup
2. Wells Fargo
3. Bank of America
4. J. P. Morgan Chase

Congratulations to Drew Keeling, of Kusnacht, Switzerland, for being the first to get back to me with correct answers to all 10 questions:

1. c
2. a
3. d
4. c
5. c
6. b
7. to strengthen its balance sheet
8. d
9. c
10. 2d, 3a, 3c, 4b

What if CEO's Made Decision as if they Were Using Family Money

2008-09-19T11:15:00.000-07:00

I've been hearing for years that small businesses create a disproportionately high percentage of the new jobs in the United States, and this year has really driven home some of the reasons why.

This summer, I traveled with my family for a vacation at the Tyler Place Family Resort in far-north Vermont, on the shores of Lake Champlain.

My wife Camilla found it through an Internet search last February, and although it is rated one of the top 10 family vacation resorts in the U.S., I assumed booking a week for this summer would be easy, given the bad U.S. economy.

Was I ever wrong: they were 100% filled, although we did get a chance to grab another family's canceled reservation, for a week that was not entirely of our choosing.

How does Tyler Place, which has been run successfully by successive generations of the Tyler family for 75 years, sustain this level of consumer demand and success?

Simple, they have a strong business strategy which they adhere to, and execute with excellence. "We could stay open another week or two for the leaf season, but that's not our market," owner Ted Tyler told me. Tyler Place is totally focused on creating a one-week relaxing vacation experience for families with children. Given that there are no phones, televisions, nor easy Internet access you are bound to relax, and five different age-appropriate programs will engage and delight your children.

Tyler Place is fairly priced for what you get, and it is evident that they have reinvested a fair amount of money into the facilities. The questionnaire that you are asked to complete upon checking out is a highly evolved tool, and serves to keep Tyler Place running at 100% capacity for years to come. For example, they ask, "do you know of anyone with school aged children whose schools end early and may be interested in coming to Tyler Place the first week of the summer."

We've all seen many large company failures that have played out over the first nine months of 2008, including financial firms such as Lehman Brothers, which inexplicably raised its dividend 13% in early 2008, and retailers taken over by private equity shops, such as Linens 'N Things. It seems that having control of large pools of other people's capital does sometimes breed a certain detachment or arrogance in CEO's decision making while the responsibility of nurturing a family business often does wonders to keep small businesses "on-strategy", and focused on excellent execution. If corporate CEO's always ran their companies as if they were financed by family money, the U.S. economy would probably be in much better shape today.

Small Business Recession Growth Strategies

2008-06-26T18:50:00.001-07:00

On June 19th I was interviewed by Diana Ransom, a reporter for "Smart Money" , on strategies that small business owners can use to grow their business during a recession. Here are my four suggestions:

1. Look to the internet for sales growth. According to the National Retail Foundation, internet sales grew at a 21.8% rate in 2007, while total retail sales grew by only 3.9%. With gas prices above $4.00/gallon nationwide, strong internet sales trends growth is expected to continue.

2. Consider selling your goods or services outside the United States. The dollar is very weak versus foreign currencies, which means that United States products and services have a pricing advantage versus those of many other countries. For business owners with no previous export experience who are unsure of their first steps, a good place to turn is the U.S. Commerce Department's Gold Key Matching Service which will help by making introduction to experts and potential trading partners, quickly and affordably.

3. Grow by acquisition. For small business owners with expansion plans, acquisition can sometimes be more affordable than the cost of building new offices or facilities in new geographic locations or markets. This may be especially true during a recession, when business values are generally depressed. It is important, however, that the acquisition make strategic sense.

4. Gain market share with stellar customer service. If your business is not poised to expand through new channels, geographies, or by acquisition, you'll have to earn your sales growth by winning away share of market from your competitors in your current market. One proven way to do this is by offering superior customer service than your competition.

SBA 7(a) Loans Down 18% vs. Year Ago

2008-06-22T12:01:00.000-07:00

The Small Business Administration backed about 40,000 of its 7(a) loans in the first quarter of 2008, down 18% from the same period one year earlier. The drop off in the SBA's express loan program was even greater, at 30%. Eric Zarnikow, associate administrator for capital access at the SBA attributes the decline to a "weaker economy." Congresswomen Nydia Velazquez (D-NY), chairwoman of the House Small Business Committee, disagrees, saying the SBA's declining loan volume can't be attributed entirely to the bad economy. Says Velazquez, "it is important to remember the SBA's loan program was created to kick in during tough times."

Restaurant and Bar sales down 19% in Bisbee

2008-05-23T14:19:00.000-07:00

Bisbee, Arizona, located 90 miles from any major highway, started feeling the pinch from higher gas prices at the end of 2007. "Business Week" reported that while the 130-year-old mining town had 58,000 visitors in 2007, up 16% from 2006, restaurant and bar sales were down 19% in December. According to Wikipedia, Bisbee was featured in the 1957 film "3:10 to Yuma," as well as its 2007 remake.

Consumer Sentiment Drops to 28 Year Low

2008-05-23T14:07:00.000-07:00

Consumers' sentiment dropped to a 28-year low in early May of 2008, as reflected by the 59.5 University of Michigan index. Survey Director Richard Curtin told "Forbes" that "all of the the early May decline was among households with incomes below $75,000." According to Curtin, "record number of consumers... (9 out of 10)... said the economy is in a recession."

26 Billion Dollars of Angel Investments in 2007

2008-05-21T16:49:00.000-07:00

Despite the weakening U.S. economy, angels invested $26 billion into 57,120 ventures last year, according to the University of New Hampshire's Center for Venture Research. The dollar amount invested represented a 1.8 percent increase over 2006, while the number of entrepreneurial ventures receiving angel funding represented a 12 percent increase. Studies show that entrepreneurs with good ideas who start their businesses in down economies will do better, as they will benefit from the lower cost of land, labor, and purchased goods and services.

Rare Glimpse at Linens 'n Things Financials

2008-04-20T19:03:00.000-07:00

Linens 'n Things provided an unexpected public posting of its financial results under private equity firm Apollo Management when it recently posted its 10-k report for 2007 in conjunction with the desire of some of its private shareholders to sell shares on the NYSE. Linens 'n Things posted a $242 million net loss in 2007 on revenue of $2.8 billion. The company had a $36 million net profit in 2005 on revenue of $2.7 billion in 2005, the last full year of public ownership (Apollo Management took the company private in February, 2006.) Linens 'n Things gross profit margin slipped from 40.8% to 37.5% over the two year period; Selling, General & Administrative Expense increased from 38.5% to 43.7% of revenue; and interest expense increased from 0.2% to 3.9% of revenue. By comparison, publicly-owned segment leader Bed, Bath & Beyond has 2007 gross profit margin of 41.6%; Selling, General & Administrative Expense at 30.4% of revenue; and no interest expense. The Linens 'n Things 3/20/2008 10-k report lists numerous risks, including the following: "despite current indebtedness levels the Company and its subsidiaries may still be able to incur substantially more indebtedness. This could further exacerbate the risks associated with its substantial leverage." On April 15th, Linens 'n Things announced that it had decided to defer $16 million quarterly interest payments due to the holders of its senior secured floating rate notes.

10 Things Your Credit Card Processor Doesn't Want You To Know

2008-04-18T18:28:00.000-07:00

Kevin Scott Rizer, founder of Trade Days Processing, provides insights into the world of credit card processing fees in this informative podcast. According to Rizer, there are ten things that credit card processors don't want merchants to know. Here are eight of them:

1. Credit card processors don't care about the "ins and outs" of your business, and are not in a good position to recommend products that will best fit your needs.

2. Credit card processors are not telling merchants all of the fees that they will be charged. For example, some merchants are quoted the rate for "qualified" transactions, and fail to mention the higher rate for "non-qualified" transactions (those where the cards are not present)

3. Credit card processors can hold or take back a merchant's money if there is a "charge-back."

4. Merchants can often save a lot of money by purchasing the (inexpensive) credit card equipment they wind up leasing.

5. Credit card processors neglect to inform merchants about programs such as "pen-based debit" and "electronic check acceptance" that can save merchants money, and simplify their business processes.

6. Credit card processors have power to unilaterally raise or lower rates.

7. Merchants need to understand if the person who is signing them up for a credit card processing agreement will be reachable a few months later, to provide support.

8. If you cancel the contract with a credit card processors, there will be a cancellation fee; these can range from $150 to several thousand dollars.

Entrepreneurs' Earnings Gap

2008-04-12T11:45:00.000-07:00

Even successful business founders typically earn 35% less than they would have working for others, according to Case Western University Professor Scott Shane, author of "The Illusions of Entrepreneurship," reports BusinessWeek.com. "People who run their own businesses have greater job satisfaction," states Shane, but then we create a "myth (of entrepreneurship) that says because we like it and it makes us happy, it must also make financial sense."

Prediction Markets Gaining Popularity

2008-04-09T04:27:00.000-07:00

Best Buy, General Electric, Hewlett-Packard and others are having their own employees participate in "prediction markets" to gain insight into product demand, store opening dates, and other future events, the "NY Times" reported. The notion that the opinion of a large group of well-informed individuals will be more accurate than one or a few "experts" was popularized by James Surowiecki's book "The Wisdom of Crowds," and is now being tested by dozens of major corporations, including Google, Cisco Systems and General Mills. Small service providers like Consensus Point, NewsFutures and Xpree are assisting companies that don't have the in-house expertise to establish prediction markets on their own.

New Insights Into Wall Street Mortgage Meltdown

2008-04-05T09:41:00.000-07:00

In this enlightening podcast, University of Maryland Professor Michael Greenberger explains to Fresh Air's Terry Gross some of the origins of the current mortgage-related losses and write-downs impacting Wall Street. Credit default swaps, or bets on whether mortgage holders would default, are today unregulated at both the Federal and State level due to the Commodity Futures Modernization Act, a 262 page bill passed by Congress in 2000, right before its 2000 Christmas recess. According to Greenberger, banks have also been careful to word their credit default swap contracts to avoid falling under insurance industry regulations. "It's as if a bunch of Las Vegas bookies started taking bets, and never bothered to write them down or record them......here, these banks didn't bother to hedge themselves.....we would have been better off if Las Vegas had handled this operation, than having Bear Stearns handle it," asserted Greenberger.

Who Profits From IPO Underpricing?

2008-03-28T04:48:00.000-07:00

Research has shown that Initial Public Offerings (IPO's) are underpriced by an average of 15%. This "Knowledge at Wharton" article by Professor Robert E. Hoskisson suggests that "it is in the interest of investment banks to underprice an IPO because it nurtures ties to institutional investors, who are often repeat customers of the banks and who benefit directly from the underpricing." So-called "inside directors" (i.e., company managers who also sit on the board) need to take a stand on behalf of shareholders to minimize IPO underpricing, according to Hoskisson, and his study co-authors, Jonathan D. Arthurs of Washington State University, Lowell W. Busenitz of the University of Oklahoma, and Richard A. Johnson of the University of Missouri.

DiNapoli Discusses NY State Budget Deficit

2008-03-24T20:23:00.001-07:00

Speaking to members of the Westchester County Association in Tarrytown this morning, New York State Comptroller Thomas DiNapoli said, "For too many years, New York State has treated debt as a surrogate for wealth, using it to buy things we want, rather than things we need." New York is spending more money than it is taking in, DiNapoli told his listeners, adding that "faced with a budget deadline, and demands from constituencies, we make compromises, we get the budget done, but don't deal with structural imbalances." The New York budget crisis is not as severe as New Jersey's Di Napoli told a questioner, but its budget practices are not as good as New York City's, where Mayor Michael Bloomberg used recent good years as an opportunity to pay down old debt and build reserves.

Bear Stearns' Schwartz: "No Liquidity Crisis"

2008-03-21T13:07:00.000-07:00

CEO Alan Schwartz was briefly interviewed by CNBC's award-winning journalist David Faber on Tuesday March 14th, and asserted that there "was no liquidity crisis" at Bear. Five days later, Bear Stearns' management agreed to be acquired for $2/share by J.P. Morgan Chase, as an alternative to bankruptcy, as other money center banks had lost confidence in Bear Stearns solvency, in the face of recent mortgage bond related losses, and its high leverage. On 3/19, the "Wall Street Journal" said that Mr. Schwartz failed to share with CNBC viewers how the leadership team "had weathered past financial crises" and his "delivery made some experts wince."

The Profit Calculator

2008-03-19T18:19:00.000-07:00

When people ask me how they should estimate the profit margin of a planned new business, I advise seeking out those who are already in that business to see what you can learn. As an alternative, if you are thinking of opening a pizza place, a copy shop, a diner, or one of a number of other businesses, "New York" Magazine has identified the profit drivers in a recent issue. Click below and you will also find out how the New York Yankees franchise increased $200 million in value, despite a $28 million loss.

RJR Nabisco still among top 10 LBO's

2007-04-28T06:45:00.000-07:00

There has been extensive media coverage on the resurgence of leveraged buyouts (LBO's), including a recent cover story, "The Buyout Binge" in the April issue of "CFO Magazine." Nine of the top ten LBO's were recent, and then there was the 1988 acquisition of RJR Nabisco by Kohlberg Kravis Roberts. I showed a segment of the movie "Barbarians at the Gate" to my NYU finance class, and also highly recommend the book. The RJR Nabisco deal highlights the importance that understanding business fundamentals plays in any business deal. Henry Kravis knew he needed a better understanding of RJR Nabisco's core operations so he could price his bid accurately and compete with the insider buyout bid by CEO Ross Johnson. This made Kravis dependent on RJR Nabisco executives such as John Greeniaus, CEO of Nabisco, for their cooperation. Despite Ross Johnson's entreaty, "Johnny, I'm going to make you rich!" Greeniaus eventually did share valuable insights with the KKR team. Hopefully dealmakers are not losing sight of business fundamentals in today's overheated LBO market. The year after the RJR Nabisco deal the market dropped 200 points (a lot in 1989) due to the failure of Robert Campeau's US retail operations, and the unraveling of a $6.8 billion buyout of United Airlines. Nobody wants to see a similar market meltdown resulting from the most recent crop of LBO's.

Finance Exam Questions - Can you solve 'em?

2007-04-25T10:38:00.000-07:00

I haven't posted in the last three months to this blog because of a heavy teaching load at NYU School of Continuing Professional Studies, where I teach "Fundamentals of Corporate Finance." Here are five questions from a practice exam I recently gave to my students; how many of these can you solve?

1. If a company with $3 million annual revenue decreases its accounts receivables from 45 days outstanding to 30 days outstanding how much cash is freed up?

2. An investor buys a 30-year, 10% interest bond, for $100,000. If interest rates increase to 20%, the value of this bond would change to:
a. $50,211
b. $91,667
c. $104,762
d. $176,862

3. Which of the following statements distinguishing debt versus equity is true?

a. Debt is an ownership interest, while equity is not
b. A publicly-owned firm’s equity has a fluctuating market price, not its debt
c. An all-debt firm is more likely to go bankrupt than an all-equity firm
d. Companies must have some debt in place before they can sell equity

4. A firm has operating income of $50 million, interest expense of $18 million, dividends paid of $15 million, and a 40% tax rate, what is net income?
a. $10.2 million
b. $12.8 million
c. $19.2 million
d. $21.0 million

5. A premium bond has a coupon rate that:
a. is less than the yield to maturity.
b. equals zero.
c. must be variable.
d. equals the current yield.
e. exceeds the yield to maturity

ANSWERS: 1. $123,288, 2A, 3C, 4C, 5E

Balance Scorecards add Insight

2007-01-31T18:01:00.000-08:00

A Balanced Scorecard is used to regularly monitor a business' success on a number of fronts: Sales Pipeline, Marketing Spending, Client Effectiveness, Process Improvements and Financial Results. With such balanced reporting an organization is really forced to own up to its weak points and take actions. But because a Balanced Scorecard covers so many functional areas, it requires a multi-functional effort, plus high-level sponsorship, to successfully launch the report. One word of advice: resist the temptation to load up a Balanced Scorecard with too many metrics, it is best to keep it to 15 or fewer.

It's January, do you know where your budget is?

2007-01-31T17:59:00.000-08:00

If your business has not yet created a budget for 2007, it is still worth taking the time to do so. Having a budget gives a comparison basis for each month's actual results, to see where you are ahead and behind pace. To make your budget a more useful management report, try to group p&l lines as follows: 1) cost of revenues, 2) sales and marketing, 3) general & administrative, with sub-totals for each section.

University Venture Fund Investing $18 Million

2006-10-30T18:52:00.000-08:00

The University Venture Fund(UVF) recently announced that it has some $18 million to invest in new and growing companies, "Entrepreneur" reported. The UVF has deep ties to Brigham Young University, the University of Utah, Westminster Collge and Wharton School of Business. "We don't mandate that capital go to alumni," says managing director Jared Hutchings, "But we certainly give preferential treatment."

Weed Control Business Owner Picky About Investors

2006-10-30T17:55:00.000-08:00

Pam Marrone has attracted $570,000 for Marrone Organic Innovations from angel investors she feels she knows well. Her selectiveness is based on her prior experience at AgraQuest, a pest-control start-up funded with $50 million from venture capitalists and other investors. At AgraQuest, Marrone had a falling out with her investors over business strategy, and subsequently left the company. At Marrone Organic Innovations, a weed control business, "I'm starting up again really determined to find investors that do share our values," says Marrone. "I've learned that you don't accept just anybody's money."

More Biz Owners Selling Businesses Themselves

2006-09-25T13:58:00.000-07:00

The percentage of listings at BusinessesforSale.com posted by owners has doubled to about 10% over the last five years, CEO Marcus Markou told BusinessWeek SmallBiz, according to an article in the Fall 2006 issue. Robert Fliegel, owner of Discovery Treks posted a listing for his business in January and sold it to an Arizona couple for $265,000 by July, saving a 10-20% broker commission. "People who try to sell on their own end up wasting a lot of time with unqualified prospects who have no intention of buying," cautions business broker Karl Grasemann. Other online exchanges include BizBuySell.com and BizQuest.com.

Women Entrepreneurs Have Multiple Funding Sources

2006-09-25T12:59:00.001-07:00

Women comprise about 40% of all small-business owners, but only 3% of all female entrepreneurs owned small companies with revenue over $1 million, compared to 6% of all male entrepreneurs, according to the Center for Women's Business Research. Fortunately, women entrepreneurs have more resources than ever before to reach out for funding, the 9/25/06 "Wall Street Journal" reported, including: the SBA Office of Women's Business Ownership, Count Me In, Make Mine a Million, Ladies Who Launch, Golden Seeds and the National Association of Women Business Owners.

SEC is backpedaling on Small Biz SarbOx Exemption

2006-09-17T03:50:00.001-07:00

According to BusinessWeek SmallBiz's Summer 2006 edition, the Securities and Exchange Commission Chairman Christopher Cox has indicated that he and other SEC commissioners would rather make Sarbanes Oxley provisions work more efficiently, rather than exempting small businesses, according to an SEC spokesman. Prior to this May 17th decision, on April 23rd, a 21-person Advisory Committee on Smaller Public Companies had recommended to the SEC that the smallest public companies be exempted from compliance with Section 404 of the SarbOx regulations, which requires that companies complete an internal audit of controls they have already established. The advisory committee's recommendations, if adopted, would have exempted 7,400 businesses with market capitalization under $787 million, representing 79% of public companies, but only about 6% of the total public market capitalization.

15 Things You Need to Score VC Funding

2006-08-16T11:33:00.000-07:00

Vivek Wadhwa tells "Business Week Online" fifteen things you need to know before you go for VC funding. The list includes ten things you need to have in place, and five insights about how VC's conduct their due dilligence on your business.

This article is truly a must-read for anyone thinking about seeking out VC funding for the first time. Venture Capitalists really leave no stone unturned to find out about you, your people and your track records before they invest. Also, please be sure to read to the very bottom of the linked article, including the last paragraph where it says VC's are looking to make 5-10 times their investment in 3-5 years. By my calculation, this equates to an internal rate of return in the 60-70% range. If this seems greedy on the VC's part, bear in mind that some investments never pay back a dime! - dr

Corporate Finance Questions - Test Your Financial IQ

2006-08-08T09:48:00.000-07:00

Q1. Ignoring capital gains as an alternative, the tax law changes in 2003, (which lowered individual tax rates for dividend income to 15%) tend to encourage a:

A. lower dividend policy.
B. constant dividend policy.
C. zero-dividend policy.
D. higher dividend policy.
E. restrictive dividend policy

Q2. For a CFO of a company trying to achieve the optimal capital structure, which of these would be the best piece of advice to follow:

A. Increase equity financing to diversify the shareholder base, and lessen risk
B. Increase equity financing, but do not exceed your target dividend payout rate
C. Increase debt financing, as long as debt rating stays at C or above.
D. Increase debt until the benefits from tax shield on debt are offset by financial distress costs

Q3. Which statement best explains why General Motors has a Beta of 1.77, while Heinz (maker of Heinz Ketchup and other food products) has a Beta of .44?

A. Because General Motors has a lower stock price than Heinz
B. Because GM has greater debt than Heinz.
C. Because consumers will keep buying Heinz food products in a recession, while they may postpone purchase of a new General Motors vehicle.
D. Because headquarters for General Motors is in Michigan, in the middle of the US, and Heinz is in Pittsburgh, closer to the East Coast.

Q4. A company has a weighted average cost of capital of 8%, based on a cost of equity of 11%, cost of debt of 5%, and a 1-to1 debt-to-equity ratio. A year later, the the cost of equity and cost of debt for the company are unchanged, as is the market value of its debt. However the price per share of its stock has doubled, while the number of shares outstanding have not changed. What has been the impact to the weighted average cost of capital for this company?

A. Decreased 1pp from 8% to 7%
B. Unchanged at 8%
C. Increased 1pp from 8% to 9%
D. Increased 8pp from 8% to 16%

Q5. The owner of a $5 million revenue business is turned down for a $150,000 loan by a commercial bank because they are concerned about his ability to repay. The owner approaches an asset-based lender, but due to poor record keeping is unable to tell the lender what his latest accounts receivable account balance is. *Fortunately, the owner is able to find out from his bookkeeper, that on average, his customers pay in 30 days. If the asset-based lender will loan 70% of the accounts receivable balance, how big a loan will this business owner qualify for?

A. $287,671
B. $321,455
C. $345,299
D. $389,711

Please contact David@RudofskyAssociates.com if you are interested in knowing the correct answers!

Venture Capitalists Investing in Later Stage Businesses

2006-07-31T17:43:00.000-07:00

Venture capitalists are increasingly looking for established companies to invest in, the "New York Times" reported. For the first half of 2006, 46 percent of first-time venture investments went into established companies - three years or older, and with established revenue streams - up from 30 percent in 1995, according to the National Venture Capital Association. Reasons for the trend include a sluggish market for initial public offerings, and the ability of cash-laden venture capitalists to put more money to work in larger, more established firms.

Last October I helped an entrepeneur finish his business plan over a two week period, for a new medical device that had vastly better technology and ergonomics than what was currently in the market. He was looking for $2 million to stage the introduction. I just got a call from him, this past June, that he was close to securing financing....nine months later. If the trend of venture capitalists looking for more established companies continues, situations such as this will become even more common in the years to come. -- dr

SCORE Honors Six NY Small Business Successes

2006-07-28T06:28:00.000-07:00

On Tuesday July 25th, the New York chapter of SCORE, Counselors to America's Small Business, presented awards to the founders of six successful small businesses: Lisa and Felix Hendrickson of Hendrickson Custom Cabinetry, Peggy Levee of Rain or Shine (tent rental), Caylin Sanders of EscapeMaker.com, the founder of The Pink Slip, Carl Broady of Urban Biker Magazine and David Rudofsky of Rudofsky Associates. For a full list of previous SCORE successes, go to: http://www.score.org/success_story_archive.html

My SCORE counselor was the one who suggested the name Rudofsky Associates, and also gave me great advice on how to network with other independent consultants and grow my consulting practice. Interestingly, most of the other awardees needed assistance from SCORE in the areas of business planning and financing, as opposed to marketing. SCORE has a strong affiliation with the Small Business Administration, which gives them deep insights into how new business owners should apply for SBA-backed loans. -dr

Prosper Marketplace Inc. Boosting Peer-to-Peer Lending

2006-07-24T14:02:00.000-07:00

Since its start-up in February, 2006, San Francisco-based Prosper Marketplace Inc. has brokered more than 1,800 loans between individuals, totaling about $7.7 million, the "Wall Street Journal" reported in its 7/24/2006 issue. The company says the proportion of lenders to borrowers has exceed their initial expectations. Lenders are being attracted by interest rates as high as 29%, while for some borrowers with bad credit, Prosper Marketplace helps them get a loan that was not available through more convention channels.

Prosper's revenue model is to earn 1.5% in fees for each loan, 1% from the borrower, and 0.5% from the lender. So the total revenue earned by Prosper on the initial $7.7 million loaned is just a shade over $100,000. The company has raised $20 million so far from venture-capital funds, so it will be interesting to see how they can use that capital to grow their business. -dr

Kiva Providing a New Source for Small Biz Finance

2006-07-21T19:32:00.000-07:00

Kiva.Org was started as an experiment by Stanford Business School students Matt Flannery and Jessica Flannery after they traveled to East Africa to review projects for the microlender Village Enterprise Fund. As reported by "Business Week's" July 31, 2006 issue Kiva has made virtual neighbors out of strangers half a world apart, and facilitated 450 microloans, totaling $200,000, since the site's inception in March, 2006. The loans have helped small business owners from Honduras to Uganda start-up small businesses, and so far there have been no loan defaults.

According to an "INC Magazine" study of successful entrepreneurs, 55% used personal savings to finance the start-up of their businesses, 6% used charge cards, 7% used bank loans and mortgages. 13% friends and family loans, 6% relied on angel investors, 4% relied on venture capital funding, leaving 12% who obtained funding from all other sources. Many of the most typical sources are simply not available to people living in developing countries, who therefore stand to benefit the most from Kiva. This is a trend that certainly bears watching. -dr

Internet Retailers' Marketing Spending Way Up in 2005

2006-07-20T12:24:00.001-07:00

Web-based retailers tripled their marketing spending as percentage of revenue, to 18% in 2005, from 6% in 2004 according to a report by market research firm Forrester Research and Shop.org, the "Wall Street Journal" reported on 6/19/2006. The increase was driven in part by competition from traditional "multi-channel" merchants according to the report.

Of course, spending competition for Google AdWords is an added factor! Entrepreneurs planning the start-up of any new business typically have a hard time deciding how much to budget for marketing spending. For those who are considering new web-based retail businesses, getting the budget right is becoming even more critical. It is nice to be Amazon, with the #15 ranked website, and spending only $199 million in marketing on $8.5 billion of sales in 2005, a spending rate of less than 2.5%. -dr

Sarbanes-Oxley Hitting Smallest Firms Hardest

2006-06-17T12:13:00.000-07:00

Enterprise Bancorp, a $55 million company based in Lowell, MA saw its audit costs increase by 100 percent, from $140,000 to $280,000, the first year it was public, CFO Jim Marcotte told the "Boston Business Journal." Enterprise Bancorp's experience is consistent with that of other small business companies, which is why the Greater Boston Chamber of Commerce filed a report to the SEC when the commission submitted its request for public comment on possible modifications to Sarbanes-Oxley to meet the needs of smaller firms. "Sarbanes-Oxley has become one more burden in the steep climb towards an initial public offering that is especially difficult for small companies," states the report.

Building a Winning Finance/Accounting Team

2006-05-04T10:12:00.000-07:00

Without the right financial professionals, companies can struggle needlessly. Many good businesses go through tough times, and even go out of business, because cash flow wasn't properly projected and managed. Business owners who don't have the proper support and assistance when they review financial results are unable to see if any operational changes would help. A savvy controller or chief financial officer can help you decide if changes in pricing, product line, capacity or sales channels make your business more profitable. This article by David Rudofsky, from the May/June 2006 issue of "New York Enterprise Report" gives advice on how to build a winning finance/accounting team.

MuscleMorph wins Wharton Biz Plan Contest

2006-05-04T03:43:00.000-07:00

MuscleMorph won the 'Wharton Entrepreneurial Programs annual business plan competition and first prize of $20,000 on April 25th. The team included Rahul Kothari, a Wharton MBA student and Rodrigo Alvarez, an inventor and doctoral student in bioengineering at Stanford University. MuscleMorph's most promising initial application would be prosthetic limbs -- including those used by 1.8 million amputees in the U.S. Other finalists in the competition included Biometric Payment Solutions, Focus Therapeutics, Home-Base, iBroker, IntelliStem Orthopaedic Innovations, Leto Pharmaceuticals, and OrthoLab Technologies.

Wharton Panel Debates India vs. China

2006-04-29T02:12:00.000-07:00

A panel of Wharton faculty and experts in emerging markets private equity recently debated the relative advantage of private equity investment in India vs. China. India has solid underpinnings for economic growth, including a democratic government, a strong education system, widespread knowledge of English and a deep pool of expatriates experienced in Western businesses, according to the panelilsts. Wharton Professor Jeremy Siegel suggested that India's "soft" attributes, such as a democratic government and a free press that is rooting out corruption, outweigh China's more impressive investments in "hard" infrastructure such ports, plants, and transportation systems. Siegel is also concerned about China's system of "guanxi" in which business is conducted more through elaborate networks of relationships than on merit.

Small Business Administration Looking to cut Microloan Program

2006-04-26T06:05:00.000-07:00

For the third year in a row, the Small Business Administration (SBA) is looking to cut its microloan program, and once again the Senate and House are lining up against it, the "Wall Street Journal," reports. The Microloan program provides funding to nonprofit community-based lenders who, in turn, lend and provide technical assistance to small-businesses. The SBA contends that microlans can be done more efficiently through its existing 7(a) loan program, while critics contend that most individuals who apply for microloans lack the credit scores needed to qualify for the 7(a) loan program.

If it Sounds too Good to be True....

2006-04-26T05:43:00.000-07:00

Beware of individuals who claim they know of funding sources that do not have to be repaid, or that they will connect you with lenders, despite your poor credit record, past bankruptcies or lack of assets. These and other common scams are outlined for "Business Week Online," by David Weiss, president of the Better Business Bureau serving greater Cleveland.

NPR Sunday Puzzle

2006-03-27T08:19:00.000-08:00

Weekend Edition Sunday, March 26, 2006 Puzzle master Will Shortz quizzes one of our listeners, and has a challenge for everyone at home.

Challenge from March 26: From David Rudofsky of Sleepy Hollow, New York:

Take the name of a geographical area in the New World (in the western hemisphere). It's popular with tourists, and has seven letters in its name, one of which is an "A." Change that "A" to an "S" and rearrange the result to name a geographical area in the Old World, also popular with tourists. What places are these?

Business Owners Have Multiple Selling Options

2006-03-20T09:50:00.000-08:00

Michael Pfeffer, founder and managing director at Post Capital Partners, describes various sales options for business owners in this month's "New York Enterprise Report." In a Management Buyout, the business owner sells the company to the existing management team, simplifying the due diligence process. However raising the necessary capital may be a challenge for the management team. Strategic Buyers, such as customers, suppliers, or competitors, may be an attractive, high-value sales alternative, but could leave valuable information in a competitor's hands, if a sale is negotiated and not completed. Private Equity buyers are a third alternative worth exploring, but it is essential for the business owned to determine if the potential buyer's objectives are aligned with his own.

Startups May Face a Capital Gap

2006-02-26T02:04:00.000-08:00

The probability of a venture capital firm investing in a start-up business now is far less than it would have been in 1999, reports "INC." Magazine. Ironically, this is partly due to the glut of capital available that venture capital funds are trying to invest, which is pushing them to do bigger deals, sums of $10 million and up that the typical start-up cannot absorb. Jeffrey Sohl of the
Center for Venture Research at the University of New Hampshire calls this "the capital gap."

General Mills Upgrades its Financial Training

2006-02-23T06:25:00.000-08:00

A special Human Capital edition of "CFO" magazine describes how General Mills has upgraded its training for financial professionals since the acquisition of Pillsbury in 2001, and with the full support of CFO James Lawrence, who was hired in 1998. The company's finance leaders identified the four most important focus areas: new-hire training and orientation, midcareer training, strategic thinking and training on financial reporting regulatory changes. General Mills uses a mix of eLearning and classroom-based training. The curriculum is highly relevant to the work of General Mills attendees, and the teachers - in-house subject matter experts - are given special training themselves, so they are prepared to engage, and not simply lecture the students.

How to Raise Your Firm's Financial IQ

2006-02-16T09:37:00.000-08:00

In this excerpt from the new book "Financial Intelligence," the authors tell HBS Working Knowledge that "it is not enough to give a one-time training couse or hand out an instruction book and expect everyone to be enlightened." Repetition and engagement are both critical if financial literacy is going to become part of a company's culture.

Dashboard Software More Affordable for Small Business Owners

2006-02-11T12:03:00.000-08:00

The 2/13/06 issue of "BusinessWeek" describes how NetSuite and other products that run $1,000 to $2,000 per user have made dashboards more affordable than in the past for small business owners. Those thinking about implementing a dashboard for their business for the first time should: 1) start slowly, 2) pick the right information, 3) have your business people drive the project, 4) avoid data overkill, 5) keep a personal touch - remember to still walk around and talk to your workers even after the Dashboard is up an running!

US Savings Rate Negative for Seventh Straight Month

2006-01-16T09:08:00.000-08:00

The Commerce Department determined that Americans spent more than they earned for the seventh straight month in November, 2005, increasing the chance that the US will have a negative savings rate for 2005 as a whole, Kevin Lansing, an economist with the Federal Reserve Bank in San Francisco, recently told the San Francisco Gate newspaper. If that happens, it would be the first time the US had a negative savings rate since the Great Depression. Although strong consumer spending has boosted the US economy in recent years, many economists say housing prices will, at best, flatten out, breaking the cycle of refinancing that has allowed consumers to borrow and spend.

Zoomerang is Internet Survey Market Leader

2006-01-16T08:45:00.000-08:00

Zoomerang is the market leader ahead of other Internet-based market research survey service providers EZquestionnaire, KeySurvey and Survey Monkey. Zoomerang offers a large e-mail database that can be tailored to its client's survey needs, while its competitors do not. A CNNMoney.com report describes how Konstantin Guericke, the co-founder of LinkedIn, an online networking tool for professionals, used a Zoomerang survey to poll LinkedIn clients, and determine that 80 percent wanted him to add a search function, compared with 50 percent voting for the addition of photographs. All of the on-line surveys mentioned above are easy and less expensive than phone surveys, but do-it-yourselfers run the risk of creating a poorly designed survey, or misinterpreting the results.

Maryland Fair Share Bill Impacts Wal-Mart

2006-01-16T08:18:00.000-08:00

Maryland's legislative branch overrode Maryland Governor Robert Ehrlich's veto to pass a bill that would require companies with more than 10,000 employees in the state to spend at least 8 percent of their payroll on health benefits, or pay the balance into a state low-income health insurance fund. Four companies - Northrop Grumman, Giant Foods, Johns Hopkins University, and Wal-Mart, have this many employees in Maryland, but only Wal-Mart fails to spend at least 8 percent on healthcare. Burt Flickinger, an independent retail analyst, thinks the Maryland bill could have "massive" implications for the world's largest retailer. At least 13 other states proposed similar "Pay or Play" bills in the past year, and the measure is still alive in New York, Massachusetts, Minnesota, Oregon, Pennsylvania and Washington, reports Parija Bhatnagar for CNNMoney.com.

Did I Pay That Vendor Twice -- Again?

2006-01-11T16:41:00.000-08:00

Business owners who want to achieve improved accounts payable practices can follow these steps: 1) Have all invoices mailed to the individual responsible for accounts payable, 2) Share knowledge across their organization, 3) Take advantage of vendor discounts, 4) Supervise and review accounts payable activities, 5) Segregate responsibilities. An article in the January '06 "New York Enterprise Report" provides all the details.

Biz Plan Challenge Winner Declines VC Funding

2005-12-29T06:51:00.000-08:00

As winner of the Carrot Capital Education Foundation Business Plan Challenge, Tom Szaky was in position to get venture capital funding for Terracycle, a start-up business focused on the organic plant fertilizer market. However, as discussions with the firm's potential VC backers progressed, the two sides clashed over spending priorities, the need for specific cash flow projections and milestones, and composition of the management team. As described in Canada's "National Post", despite having only $500 cash on hand at the time, Terracycle ultimately did not go the VC funding route, but instead was able to use the resulting PR to attract a smaller level of angel funding.

Wharton Prof Measures Cost of Employee Absences

2005-12-13T06:37:00.000-08:00

Wharton Professor of health care systems Mark Pauly has led a team that measured the financial consequences of employee absences for individuals in thirty-five different job classifications across twelve different industries. Distilling the learning from 800 differrent interviews, the team was able to establish "multipliers" of workers wages, that described the financial impact of a day's absence as a proportion of the worker's daily wage or salary. The multipliers ranged from below 1.1 for waiters and non-residential construction workers, to greater than 1.5 for motor vehicle salespeople and mechanical engineers. Pauly believes this work gives companies the ability to more accurately measure the payoff that comes from improving the health of their employees.

The Company that Grew too Fast

2005-12-01T10:42:00.000-08:00

Brian Le Gette and his Wharton classmate and business partner Ron Wilson could not finance the spectacular revenue growth of 180s, a Baltimore-based sports apparel company which had once place 32nd on the INC 500 listing of fast-growing small businesses. Le Gette ultimately had to give up control of the company, and get help from Patriarch Partners, a private equity firm specializing in companies with distressed debt. John Anderson's story in the November 2005 issue of INC. Magazine gives all of the details.

When VC Funds Not Likely, Consider Bootstrapping

2005-11-30T18:36:00.000-08:00

Ilana DeBare tells "San Francisco Chronicle" readers two ways that they can start a business with no cash through bootstrapping: 1) time-shifting your payables into the future, 2) bartering for services that your business can provide now in exchange for goods or services you need right away.

Fundraising Advisor Helps Zoe Foods Prez

2005-11-23T13:36:00.000-08:00

Zoe Foods founder and president Tori Stuart tells Entrepreneur magazine readers how she is staying focused on running her business by outsourcing the fund raising process as she seeks $3 million to fuel the growth of her $2 million natural foods company. "As a small company owner, I find raising capital is a big time-sink," Stuart says. "And nobody's going to do my job if I'm raising money." Patrick Vaughan of Triarch Capital Partners concurs with Stuart: "It's a significant distraction to raise money yourself. Once you publish your numbers to a prospective investor, they'll start tracking how you do. That's the wrong time to stub your toe." An investment banking advisor can help a small business owner complete or polish a "deal book", create a "data room", help decide whether the money raised should be equity or debt, and help price the deal.

Angel Investing Explained at Wharton Club Event

2005-11-04T20:38:00.000-08:00

Angel investors want entrepreneurs to demonstrate that they can "build someting and sell it," Ellen Sandles, Executive Director of the Tri-State Private Investors Network, told the Wharton Club of New York. Angel groups are more forgiving (than venture capitalists) of a not-filled-out management team, but would rather pass on a deal than invest in a company that is at risk of running out of cash before breakeven is achieved.

NY State Ranks Near Bottom in Small Business Survival Index

2005-10-23T10:58:00.000-07:00

New York state ranked 44th amonth the 50 states in terms of policy environment in the 2005 Small Business Survival Index released by the Small Business & Entrepreneurship Council. Raymond Keating, chief economist for the council, and the survey's author told the "Westchester County Business Journal" that "politically, New York has a big-government philosophy, which leads to high income and property taxes. The costs of the state's policies are real and obvious, but it appears the policymakers talk themselves into ignoring the consequences of the economic choices they make." South Dakota, Nevada and Wyoming ranked at the top of the 2005 index, with the most small business friendly policy environment.

SBA Borrowers Seeing Higher Fees

2005-10-21T13:03:00.000-07:00

An $80 million appropriation to cover the cost of issuing SBA guaranteed loans was removed from the congressional budget two years ago. While SBA 7a guaranteed loans continue to be made, the eliminated appropriation has mean loan caps, and higher fees place on lenders and borrowers, Keith Loria writes for the "Westchester County Business Journal." Nonetheless, the number of 7a loans initiated in Connecticut has hit 1,500, bettering the previous annual high of 1,200, helped by the SBA Express program, which offers much smaller loans so they can get processed more quickly.

Small Business Loan Applications Getting Snagged by Poor Documentation

2005-10-03T13:33:00.000-07:00

According to an Amercian Bankers Association survey of its member banks, 67% of small-business loan applicants typically lack the documentation they need, the "Westchester County Business Journal" reported. According to James Ballentine, director of the ABA Center of Housing, Community and Economic Development, the survey also found that applicants have an incomplete business plan 43% of the time, lack collateral 27% of the time. Responding bankers had the chance to give tips to potential loan applicants, these fell into five categories: 1) Be prepared, 2) Know how much you need, 3) Have a backup plan, 4) Nurture management skills, 5) Establish relationships.

How to go about Obtaining Private Equity

2005-09-22T23:35:00.000-07:00

Writing for the New York Enterprise Report, Beth Polish enumerates these tips for those looking obtain private equity for their companies: 1) Wait until you're really ready, 2) Prepare yourself and your company, 3) Identify the right target investors, 4) Conduct a two-way courtship, 5) Negotiate like a pro, and 6) Don't wait to finance your company until you're running on fumes.

Experts Disagree on Why Oil Prices Go Up

2005-08-29T15:54:00.000-07:00

Writing for the San Francisco Chronicle,, Kathleen Pender quoted two widely divergent viewpoints on oil prices. Some experts, including a team from Goldman Sachs, point to the increasing world demand, at a time when there is little excess production capacity, as a factor that will keep oil prices in the $50 to $105 per barrel range for years to come. But a separate group of experts says that if it were not for speculators, that oil would still be trading in a $30-40 per barrel range.

Health Care and your Small Business

2005-08-26T08:21:00.000-07:00

The Small Business Admiminstration fielded questions via the web on Thursday August 25th, including explanations of Health Service Accounts (HSA's). There is also discussion about a bill awaiting passage by the senate that would allow small business owners to leverage their numbers and achieve better insurance rates, on a regional or national basis.

Savings Rate Hits Zero in June

2005-08-08T21:06:00.000-07:00

The savings rate for June 2005 hit zero, for only the second time since 1959, when the Commerce Department began tracking savings by consumers. "[Rising home values] are making people feel they don't need to save," Lakshman Achuthan, managing director of the Economic Cycle Research Institute, told CNN Money. While high levels of consumer spending are helping drive the economy now, if real estate prices start to decline, it will be bad for the economy, as consumers run out of home equity they can tap.

Atkins Nutritionals Files for Bankruptcy

2005-08-01T19:24:00.000-07:00

Privately owned Atkins Nutritionals Inc. has filed for bankruptcy, as the low carbohydrate diet fad has continued to fizzle, impacting the company's sales. The latest figures show only 2.2 percent of consumers are following a low carbohydrate diet, down from 9 percent at the height of the craze, the "London Times" reported. Founder Dr. Atkins, who died in April 2003, received the National Health Foundation award in 1985. The diet has never been endorsed by the American Medical Association, which says it lacks scientific basis, and risks coronoray artery disease.

Tips to Choosing the Right Distribution Channel

2005-07-24T10:51:00.000-07:00

This New York Enterprise Report piece describes why choosing the right distributor is crucial for your business. Your product's desired distribution patterns, the nature of the proudct, and available resources all need to be considered when selecting one or more distribution channels. Direct sales can lead to the greatest revenue realization, but is also the most costly and resource intensive. Selling through distributors can place a product into new geographies and customer segments, but at a lower gross margin per unit. Selling your product through Original Equipment Manufacturers (OEM's) can be a valuable source of steady sales, but at lower gross margin than the other two options.

Dynamic Pricing Best for Retailers, but may Upset Consumers

2005-07-14T09:42:00.000-07:00

A recent University of Pennsylvania study found that 64% of respondents who had recently used the Internet did not know that it is legal "for an online store to charge different people different prices at the same time of day." Research shows that people often get upset if they learn that they paid more than someone else, possibly because they do not know much about what goes into a company's decisions to set prices. On the flip side, Wharton Professor Peter Feder says that companies that benefit most from dynamic pricing are those that experiment with different pricing strategies, trying out lower and higher prices to different customers, and utilizing coupons, discounts and other incentives to maximize the customers' shopping experience, and their own profits.

Outsourcing Opportunities for Small Businesses

2005-07-12T05:02:00.001-07:00

Dr. Alok Aggarwal, founder and chairman of Evaluserve, said that the key for smaller businesses looking to outsource is to form buying cooperatives that sufficiently aggregate demand, the Westchester County Business Journal reported. Participating at a June 23rd panel discussion at Pace University, Aggarwal said that India has attracted $17 billion in exported business activity, making it the world's current outsourcing leader. India is challenged by its slow judicial system, and will face increasing competition from Canada and Europe, Aggarwal noted.

Sarbanes Oxley Impacting Smaller Companies

2005-07-03T09:12:00.000-07:00

Many private companies are strengthening their accounting practices so their large company customers can comply with the Sarbanes-Oxley act, Business Week reported. Financiers are also holding companies to a higher standard as conditions for deals, requiring documented audits and oversight committees, both Sarbanes-Oxley requirements. Colleen Cunningham, CEO of Financial Executives International, says compliance is not a matter of if, but when.

Hain Celestial Eliminating 500 SKU's

2005-06-29T22:21:00.000-07:00

Hain Celestial, maker of Terra Chips, Celestial Seasonings, Garden of Eatin' and other natural and organic foods, announced the final implementation of its Stock Keeping Unit rationalization program. The company is eliminating 500 SKU's that are competitively disadvantaged, as a result of small production runs, and low volume of sales. The company expects to save $2 million, with savings coming from reduced spoilage, warehouse and procurement costs, consolidation of copackers and other efficiencies. The eliminated SKU's have annual sales revenue of $15 million; their sales volume is expected to be replaced by introduction of new items by Hain Celestial over the next 12 to 18 months.

Six Cash Flow Boosters

2005-06-20T13:51:00.000-07:00

Here are six cash flow boosters, as provided by consultant Norm Grill, and published in the June 20th Westchester County Business Journal: 1) Establish payment terms from the start, with your proposal, estimate or contract; 2) Analyze customer payment patterns, and revise terms and payment methods so they are more favorable for you; 3) Closely monitor accounts receivable aging; 4) Negotiate favorable payment terms (e.g., discounts for prompt payment); 5) Use email for invoicing and software to manage cash flow; 6) Consider hiring a skilled finance professional

Krispy Kreme Stumbles Recounted

2005-06-16T19:05:00.000-07:00

Krispy Kreme managed to stumble into most of the pitfalls in the franchise model, according to the cover story of the June, 2005 issue of CFO Magazine. It focused on growing revenues and profits at the parent-company level, while its franchises struggled. Raw materials and equipment were sold to franchisors at exceptionally high profit margins. The brand lost its mystique, as Krispy Kreme dougnuts went on sale for the first time at grocery stores, gas stations, and kiosks. In 2004, the SEC launched a formal investigation into the company's buybacks of several franchises, while franchisors alleged "channel stuffing." Krispy Kreme stock has dropped from it $50 mid-2003 high to $6 in early May of 2005.

Maryland Professor Documents Dot-Com Ventures

2005-06-09T06:18:00.000-07:00

The Chronicle of Higher Education reported that David Kirsch, a University of Maryland Professor, has created an electronic archive, documenting the rise and fall of Internet-related ventures over the period 1996 through 2002. The archive, which was started thanks to grants from the Alfred P. Sloan foundation and the Library of Congress, so far lists basic information for 2,400 dot-com companies, with about half of these entries fleshed out with business plans. The archive also offers "Top Ten Lessons from the Dot-Com Meltdown."

SBA Reconsidering Definition of Small Business

2005-06-08T14:43:00.000-07:00

The Small Business Administration has holding hearings, starting in St. Louis and Seattle, as it considers changing the definnition of small business, the Seattle Times reported. Under current rules, the definition of a small business ranges by industry, but is generally defined as having 500 or fewer employees. Last summer, the SBA withdrew a proposal that would have defined the limit of "small" at 100 employees. Hearings are to continue in New York, Chicago, Los Angeles and other cities through the month of June.

Take the Guesswork out of Pricing

2005-05-30T16:03:00.000-07:00

According to an Inc. Magazine article in the June, 2005 issue, now is an important time for business owners to be reviewing pricing. To get to correct pricing, you have to take costs, competitors, customers and salesforce feedback into account. But most of all, the value that your product or service provides should be considered when setting pricing.

Foundations of a Winning Business Plan

2005-05-24T11:24:00.000-07:00

Karen Grajwer, a second year MBA student at Harvard Business School won the HBS Business Plan Contest for her plan for a company called Uplift, which will offer sophisticated, fashionable bra styles for fuller-sized women. Grajwer's advice for future entrepreneurs: 1) surround yourself with a good team, and 2) know your market.

Wharton Conference Brings Clarity about China's New Path

2005-05-19T05:45:00.000-07:00

The Wharton China Business Forum was held recently, and brought together business leaders and economics, for enlightening discussions about China's financial reform, entrepreneurship, consumer markets, environmentalism, energy issues and other topics.

Panel of Experts describes the "Road to an IPO"

2005-05-17T21:00:00.000-07:00

This morning a panel of experts convened at the NASDAQ MarketSite to describe the measures that any company considering an IPO in the future should be taking: 1) Strengthen internal controls to be in compliance with SOX 404, 2) Develop accurate forecasting of quarterly earnings, 3) Streamline the quarterly closing process (the SEC is unforgiving to companies that cannot file their 10-k within 45 days), 4) Look to add independent board members as necessary, 5) Look to add a financial expert to the Board audit committee, 6) Look into enhanced Directors and Officers liability insurance 7) Make sure your CEO/CFO has the energy and commitment to speak to analysts and investors, on a pre-IPO and post-IPO basis, 8) Consider if this is the right time to hire a COO and full-time Investor Relations officer. Panel members included Mark Davis (Deloitte & Touche), Stephen Older (Akin, Gump, Strauss, Hauer & Feld), James Runcie (UBS Investment Bank), David Guyer (Eyetch Pharmaceuticals), Heather Sweeny (NASDAQ), and moderator Ed Paisley (The Deal). The panel discussion was sponsored by the Executive Council of New York.

"Future for Investors" remains bright if Developing Economies Prosper

2005-05-15T09:27:00.000-07:00

Speaking to University of Pennsylvania alumni yesterday about his new publication "Future for Investors", Wharton Professor Jeremy Siegel explained the importance to the United States that the economies of China, India and other developing coutnries continue to prosper. In 1950, there were seven workers for every retiree in the United States; by 2050, there is projected to be less than two U.S. workers for every retiree. For Americans to be able to retire at 65 or less, the Indian and Chinese economies must continue to prosper, so they can provide goods in exchange for U.S. monetary assets. U.S. equities have provided a historical real return of 6.5 to 7%. Professor Siegel projects that even with the surge of retirements between now and 2050, US stocks should still provide a 5.5 to 6% annual real return.

Online Spending was up 24% in 2004

2005-05-12T15:08:00.000-07:00

According to Jupiter Research, online spending jumped 24 percent to $69 billion in 2004. Smart Money magazine reports that 71 of the top 100 ecommerce Websites offered some sort of money-back product guarantee, up from 45 percent in 2003, while nearly half now offer free shipping on certain purchases. Online jewelry sales grew 113 percent in 2004.

Customized U. S. Stamp Printing Resumes May 17th

2005-05-09T09:36:00.000-07:00

Starting May 17th, consumers and businesses will again be allowed to print personalized U.S. postage stampes from their personal computers, following the guidelines set by the U.S. Postal Service. This will be the second stage of a test by the U.S.P.S.; the first stage was shut down in 2004, when vendor Stamps.com failed to screen photos of Theodore Kaczynski and Nicolae Ceausescu, the former Romanian dictator.

SBA guaranteed lending in Westchester County Triples

2005-05-08T08:44:00.000-07:00

Loans guaranteed in Westchester County, New York by the Small Business Administration increased by 187 percent to $23.4 million, for the six-month period ending March 31, 2005, compared to the same period one year earlier. An SBA official speculated that the economy in Westchester and nearby counties is stronger than elsewhere in New York. SBA lending increased 83 percent in the same time period for the total New York district.

DVD Rental Company Credits Blog for Doubled Sales

2005-05-05T21:43:00.000-07:00

The San Francisco Chronicle reports that an online DVD rental company is now receiving 80,000 visitors per month to the GreenCine Daily Blog , with daily dispatches from film festivals around the world. Owner Dennis Woo had doubts when an employee first asked permission to start the blog, but now credits it for doubling his sales in 2004.

Four Venture Capitalists on Evaluating Opportunities

2005-05-03T21:01:00.000-07:00

Here is a very insightful article from HBS Working Knowledge on what venture capitalists look for when evaluating opportunities.

40,000 New Blogs Popping up Each Day

2005-04-26T13:01:00.000-07:00

Business Week reported on 5/2/05 that "there are nine million blogs out there, with 40,000 new ones popping up each day." Rudofsky Associates will be posting news items and resource links on this blog, which has been created by the terrific folks at Digital Gybe