Wednesday, January 27, 2010

Is social media a fad?

First we should start off with “What exactly is social media?” According to Wikipedia, “Social media is media designed to be disseminated through social interaction, created using highly accessible and scalable publishing techniques. Social media uses Internet and web-based technologies to transform broadcast media monologues (one to many) into social media dialogues (many to many).” Social media includes websites like Twitter, Facebook, LinkedIn, YouTube, Flickr, Delicious, Digg, and many, many more. Most of these social media tools started as ways for people (not businesses) to communicate, but that isn’t true today. The most successful social-media-using businesses use social media to connect with customers, NOT as “just another marketing tactic”. Most social media sites are free, so the biggest investment by you, the small business owner, is time. You may be thinking that social media is just a fad and isn’t worth your time investment. Watch the 2 videos below to learn the reach of social media.

Some interesting facts from the videos:
1. 96% of Generation Y has joined a social network.
2. The fastest growing segment on Facebook is 55-65 year old women.
3. 300,000+ businesses have a presence on Facebook.
4. Blendtec quintupled sales with “Will It Blend?” YouTube videos.
5. Dell sold $3 million worth of computers via Twitter.

These facts (and all of the facts in the 2 videos) are truly eye-opening. As an entrepreneur, do you use social media? If no, why not? Has this video changed your mind about using social media? If you do use social media, what social media tools do you use?

Tuesday, January 19, 2010

Keep your business and personal finances separate to avoid IRS problems

Many entrepreneurs start out with little up front capital and therefore think that it will be “easier” (or just don’t think about it at all) to not separate their business finances from their personal finances. By not separating your finances, you blur the lines between business and personal which can create some major IRS headaches down the road. By law, corporations, LLCs, LLPs, and partnerships are required to have separate business accounts, but not sole proprietorships (the most popular type of small business).

As a small business owner, you will want to deduct purchases on your taxes that are business-related. If your personal and business expenses are coming from the same pot of money, the IRS may question if what you are claiming as “business expenses” are legitimate. This could lead to an audit which NO ONE wants. Not only will an audit cause personal grief, it can also hinder you from getting a business loan. Kay McDermott, a New York City-based CPA reported to, "Banks want to see clear, clean business accounts before they lend you any money. You need to demonstrate to the bank that not only is your business generating enough revenue to repay the loan, but that you are running the business professionally enough to keep that revenue coming in."

How does one keep business separate from personal? A recent article on from Trent Hamm, author of “Six Steps to Audit-Proofing Your Small Business” and “The Simple Dollar” describes the steps you should take to separate.

1. Erect a wall- Make it very difficult for money to cross the boundary between your business finances and your personal finances. For example, house your personal money in a completely different bank from your business money.

2. Document everything extremely carefully- Something can easily fall through the cracks unintentionally. Take it slow, do it carefully, and keep track of every single dime.

3. Once the separation is in place, cash should only flow directly over this wall- Do not directly pay business bills from your personal accounts. Don't put personal income into your business accounts. Handle everything by direct transfers from your personal account to your business account and allow no other financial contact between yourself and your business.

As a current business owner, do you keep your finances separate? Have you always done so? If you did not always keep personal and business finances separate, when did you change and why?

Thursday, January 7, 2010

Thoughts on "Local" and Marketing

Local food is hot. There are organizations dedicated to supporting the local foods movement (Local Harvest, Slow Food, etc.), books, blogs, and articles in major newspapers (NY Times) discussing and commenting on the movement, restaurants/chefs committed to using local ingredients, even Facebook groups dedicated to the topic. The use of local foods has even become a focal point in television shows such as 'Top Chef,' where in one episode the competing chefs were challenged to create two dishes with all local ingredients (except salt and pepper). This particular competition was held in the Napa Valley and everything available to the chefs came from within a 100 mile radius.

USDA data support the messages seen in the press and on television. The number of farmers markets has grown consistently over the past 15 years. In 1994 there were 1755 farmers markets. The number grew to 5274 in 2009 with 13 percent growth just from 2008 to 2009 (see chart). Between 2002 and 2007, the number of U.S. farms that sold agricultural products directly to individuals for human consumption grew by 6.2 percent (116,733 to 136,817), with average annual per-farm direct marketing receipts increasing from $6,958 to $8,853. In PA, direct sales grew by 11.9 percent (6,082 to 7,537) with direct marketing receipts increasing from $8,839 to $10,069.

For farms selling direct to the consumer, marketing is involved. Part of marketing involves the portrayal of a message to potential and current customers. You're trying to tell them why they should buy from you.

I've been to a number of conferences and overheard numerous comversations lately where different people at some point indicate that "local" means "quality." They make statements such as "Local produce is higher quality," or "Local is better." Better how? Answering the "better how" is the part that few seem to follow through on when they make these types of generalized statements.

Now, if people would say "Local (insert product of choice here) is better because..." this statement could be completed in several ways, depending on what was of importance to the person making it; for instance:

  • "You're supporting the local economy"

  • "It's fresher"

  • "Less fuel has been used transporting it"

With the statement "local food is better" without any further specification, isn't one implying that the food grown non-locally to you (but locally to someone else) is inferior? If you're in New York, are you saying that the food in Tennessee isn't as good as the food grown 15 miles from you? Why shouldn't someone be able to want the best quality food product no matter where it originates from?

When marketing a product, food or otherwise, you don't want to alienate potential customers because a message used was not clear or perhaps offended because you didn't provide context to allow the customer to understand why you used that language.

Entrepreneurship may be the answer for recent college grads who are struggling to find jobs

Many people, including recent college grads, are finding the abundance of jobs to be very slim. The LA Times reports that in November 2009, the national unemployment rate dropped from 10.2% to 10%, but rose to 16% for 20-24 year olds.

The National Association of Colleges and Employers reports that employers hired 22% fewer grads from the class of 2009 as compared to 2008 and will likely hire 7% fewer grads from the class of 2010 as compared to 2009. With high competition and low availability of jobs, many recent college grads are turning to entrepreneurship as a career. Challenger, Gray & Christmas, Inc (a global outplacement consulting company that provides counseling and coaching services for executives, managers, and employees) states that the annual average percentage of all job seekers starting their own businesses increased from 5% at the end of 2008 to 9% through the third quarter of 2009.

Bo Fishback, vice president of entrepreneurship at the Kauffman Foundation, a nonprofit organization that promotes entrepreneurs states, “Given the state of the economy, and the state of the job market, many young people are getting the push they needed to become entrepreneurs. It's a lot easier to decide to launch your own company when there aren't a lot of jobs out there." Entrepreneurship may also be a suitable career for young adults because they may find it easier to adapt to new technologies and may not have the monetary obligations (like children, a home, etc) that older adults may have.

This doesn’t mean that entrepreneurship will be a piece of cake for recent college grads (or any age group). A lot of hard work is needed to launch your own business. Before starting a business, look for resources created especially for entrepreneurship. Contact your local Extension office. There are many courses, materials, and web tools available. Also, by getting to know your local Extension Associate, you can learn about issues and regulations pertinent to your city/state.

As a recent (or soon to be) college grad, have you thought about starting your own business? Have you sought out any resources to help determine if entrepreneurship is right for you? Do you think that your age helps or hinders your success?