If you are considering running your own business, the next decision you need to make is whether to start one from scratch or buy one. Of course, there is an upside and downside to each of these options. The main advantage to starting one from scratch is total freedom to start the type of business you want and run it as you see fit. The downside is that the model has not yet been proven which increases your risk of failure. It could take you at least a couple of years to get it off the ground so it is generating positive cash flow. And, you can bet financing will be a problem unless you are a veteran, have a very compelling business plan, deep pockets, or rich friends and relatives.
The main advantage of buying a business is that if the business has been in existence for any length of time, the model has been proven and it is probably generating positive cash flow, if not profits. This situation dramatically reduces your risk of failure. Even if the business has been mismanaged, there is a possibility that you can turn it around and have it humming along in a relatively short period of time. The downside is that you are probably going to need more money up front for the purchase which means you are going to start out with more debt. However, this doesn’t have to be an insurmountable obstacle if you use the right business broker.
I was reminded of this during a recent SCORE meeting when Matt Schroder, of Sunbelt Business Brokers, the world’s largest business brokerage shared some surprising facts about how much easier it can be to buy a business with a reputable business broker. Matt has been operating in the Twin Cities for over ten years and has been involved in over 100 transactions. Here’s what he had to say:
“Sunbelt facilitates the sale of approximately 4000 businesses annually. They have been ranked by Entrepreneur Magazine as the #1 business brokerage franchise every year since 1995.
“There are over 90,000 businesses in the Twin Cities. Eventually every business owner is going to want to sell. Right now, we have over 10,000 businesses listed. Our niche is matching the needs of business buyers with available business opportunities. The value we bring is streamlining the process of the business sale. As is the case with sellers of real estate, owners can do it themselves-but, a broker really helps when:
- Valuing the business
- Maintaining confidentiality
- Preparing the business for sale
- Working with attorneys and accountants relative to understand tax implications
- Properly marketing the business
- Identifying and screening buyers
- Facilitating negotiations
- Preparing closing documents
- Obtaining maximum value for the business
“And, just as is the case with buyers of real estate-purchasers can buy on their own-but, a broker really helps when:
- Providing access to thousands of opportunities
- Understanding the buying process
- Finding a business opportunity that matches their needs, skills, and expectations
- Evaluating market conditions
- Structuring offers and terms
- Arranging financing
- Preparing closing documents
- Performing due diligence
“One question I hear a lot is how much do I need to buy a business? The answer is whatever you want for an annual paycheck is what you need to put down on a typical business purchase plus some extra to cover the debt service you will be paying the SELLER.
“Yes, I said the seller! 90% of all business transactions that take place in our country involve a large component of seller financing. The reason is most business owners do their financials and tax returns with only one goal in mind. That goal is to avoid paying taxes. After all, it’s one of the benefits of owning your own business. Well, that’s all well and good when you’re operating your business but when it’s time to sell and you put those financial statements in front of a banker they say-show me the money.
“Business buyers want three things that link to what bankers want. They want a paycheck, they want some cash left over to service the debt that it requires to buy the business and they want an opportunity for growth and a return on their investment. Banks want to see the same thing before they lend on the business. They need to be shown that the buyer is going to be able to take a realistic paycheck and be able to make some loan payments on top of that so that the bank feels comfortable. Now, having said that, the bank and the SBA want a lot more, but I will have to cover that topic at a later date.
“Here is the main reason why most deals are done primarily with seller financing. The business owner runs a variety of things through the business to minimize their tax bill. Over the years, I’ve seen a variety of creative approaches to business expenses such as Vikings season tickets, travel expenses that have nothing to do with running the business, meals and entertainment that are, shall we say, a bit excessive, vehicles, family members on the payroll that have never stepped foot in the place and so on and so forth.
“When the buyer of a business walks into the bank with their seller’s financial statement and tries to get a loan for a business with those types of expenses it’s usually a short conversation. Those businesses don’t have a very good bottom line so banks don’t think they make much money. Consequently, the bank’s underwriters decline the loan and the deal dies.
“Hence the need for seller financing where there are no underwriters and banking or SBA guidelines. Just the buyer and the seller, each carrying the burden of convincing the other one that they can do the job. Of course, the buyer will need a down payment so they have some skin in the game. But, it’s a much simpler transaction than going through the bank process. Plus, you don’t need to put up your home as additional collateral to get the deal done.”
If you are considering buying versus starting a business, Sunbelt specializes in businesses with or without real estate and less than $5 Million in sales, new franchises, existing franchise (re-sales) and mergers and acquisitions with sales in excess of $5 Million. They have been in the Twin Cities market since 2000. They have 30 agents and 3 offices here plus offices in Wisconsin and Chicago.
Matt Schroder promised to contribute to future articles on buying a business. So, please watch for them. In the meantime, If you would like more information, you can contact Matt directly at:
Email: mschroder@sunbeltmidwest.com
Website: www.sunbeltmidwest.com
Phone: (651) 288-1629/(612)-751-6868-cell
LinkedIn: http://www.linkedin.com/pub/matt-schroder/2/985/127
To learn more about how to start, operate and grow a successful business contact SCORE by clicking the link on the right to the office nearest you or click here to request free face to face counseling.
Have you ever considered volunteering for SCORE? Our members help millions of new or existing small businesses succeed each year by sharing their knowledge and experience. Click here or the link on the right to the office nearest you to learn more.
Susan Fronk, St. Paul SCORE
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July 27, 2010
A formidable challenge that SCORE counselors try to help aspiring entrepreneurs and small business owners overcome is a lack of funding. In the midst of daily reports about how battle-weary small businesses are starving to death as a result of the recession, I have some very positive news. The proverbial Calvary is on its way. On the Positively Minnesota website you will find details of a new loan program offered through the Minnesota Department of Employment and Economic Development (DEED). They are offering veterans of the Gulf war the equivalent of FREE money!
Are you a veteran who is an essential employee or owner of a business that has suffered economically because you were called into military service for 180 days or more? If so, you could be eligible for one of two types of business loans of $5000-$20,000.
The term for the loans is 4 ½ years, requiring no repayment for the first 1 ½ years and equal monthly payments for 3 years. Best of all, the loans are interest FREE! But, you must hurry to apply before the $400,000 fund is gone. Details of the Minnesota Reservist and Veteran Business Loan Program are listed below:
Types/Purposes:
- Business Loans. To provide relief, via interest-free loans, for small businesses which suffer substantial economic injury as a result of an essential employee being called to military service for 180 days or more.
- Start Up Business Loans. To provide financial support, via interest-free loans, for recently separated veterans to start veteran-owned small businesses.
Loan Overview:
Both types of loans are one-time loans of $5,000 to $20,000 for eligible businesses and veterans. The loan term is 4 ½ years, with no repayment for the first 1 ½ years and equal monthly payments over the remaining 3 years. The loans are interest-free. The revolving loan fund totals $400,000; applications will be accepted and loans made until all funds are committed.
Eligible Businesses:
Both types of loans are for small businesses, as defined by Minnesota Statute 645.445, which specifies the following:
- a for profit business entity which is not an affiliate or subsidiary of a business dominant in its field of operations, and
- has either 20 or fewer full-time employees, or
- had less than $1 million in annual gross revenue in the preceding fiscal year, or
- if the business is a technical or professional service, has less than $2.5 million in annual gross revenue in the preceding fiscal year
1. Business Loans:
A business must be operating in Minnesota on the date that one or more essential employees received orders for active service of 180 days or more and be sustaining or likely to sustain suffering substantial economic injury. Active service includes state active service, federally funded state active service, and federal active service.
An essential employee must be:
- a military reservist, and
- an owner or employee of an eligible business, and
- have managerial or technical expertise critical to the day-to-day operations of the business
The eligible business must be sustaining or likely to sustain an economic harm, meaning it cannot or anticipates not being able to meet its obligations as they mature, or pay its ordinary and necessary operating expenses, or manufacture, produce, market, or provide a product or service as it has ordinarily done.
DEED will use the following criteria when determining whether an applicant is eligible for a Business Loan:
- Is the applicant an eligible business?
- Is the employee essential?
- Is the business sustaining or likely to sustain an economic harm?
- How likely is the applicant to repay the loan?
- How likely will the loan help the business prevent, remedy, or ameliorate the substantial economic injury shown by the applicant?
2. Start Up Business Loans:
An eligible business must be majority owned and operated by a recently separated veteran (separated from active service after September 11, 2001).
Veterans that qualify under this program must:
- Have been on active duty on or after September 11, 2001, and
- Have been separated from service under honorable conditions after having been on active duty for at least 181 consecutive days or for the full period for which called to active duty (or after reason of disability incurred while on active duty)
DEED will use the following criteria when determining whether an applicant is eligible for a Start Up Business Loan:
- Is the small business owned and operated by an eligible veteran?
- How likely is the applicant to repay the loan?
- How likely will the loan help the applicant execute the business plan to make it a successful business?
Upon loan approval:
- DEED and applicant execute a loan agreement
- DEED and applicant execute a promissory note
- Applicant/owner provides personal guaranty of repayment
- Applicant/owner provides other security that may be required by DEED
Statutory References:
- Minn. Stat. 116J.996
- Minn. Admin. Rules 3335.0100 to 3335.0107
- Laws 2008, Chap. 363, Art. 10, Sec. 3, Subd. 3, part (b)
- Laws 2010, Chap. 347, Art. 1, Sec 6
Application:
The Minnesota Reservist and Veteran Business Loan Program applications are available from the Department of Employment and Economic Development (DEED) at Positively Minnesota website; search the site for “reservist and veteran business loan”.
For assistance completing an application contact your local Small Business Development Center (SBDC). To find a location near you, click on Find a SBDC near you.
Questions:
- Minnesota Reservist and Veteran Business Loan Program questions? Contact: Jeff Nelson, Senior Loan Officer Jeff.M.Nelson@state.mn.us 651-259-7523
- Veterans Employment Services questions? Contact: Jim Finley, Veterans Program Director Jim.Finley@state.mn.us651-259-7557
or your local Veterans Employment Representative http://www.deed.state.mn.us/veterans/list.htm
If you want to learn more about how to start, operate and grow a successful business contact SCORE by clicking the link on the right to the office nearest you or click here to request free face to face counseling.
Have you ever considered volunteering for SCORE? Our members help millions of new or existing small businesses succeed each year by sharing their knowledge and experience. Click here or the link on the right to the office nearest you to learn more.
Susan Fronk, St. Paul SCORE
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July 20, 2010
Looking for a way to grow your business without spending a fortune? Then you’ll want to attend our seminar on Wednesday, July 28th, 2010 sponsored by IKEA and SCORE. The seminar will be held at IKEA (8000 IKEA Way, Bloomington, MN 55425) 9:45-1 PM. Cost is $45.
This seminar will provide insight into the right way to develop a successful website for your business. It will also cover the basics of using social media to help market your business. Topics include:
- How to ensure your website generates more business
- How to get more people to your website
- How to design your website properly
- How to maximize search engine optimization
- How to select the right social media for your business
About the Instructors
The instructors are Doug and Brenda Arndt. Doug’s background includes experience in information technology and new business startups. Brenda’s background is in graphic design and marketing. Their varied backgrounds enhance their value to clients. The Arndt’s company, Reliable Sites, has been offering website design and related business functions since 2003. They work closely with clients to customize their particular web site for maximum success. They are experts in providing web solutions to small businesses.
Registration is required. Seating is limited! Hurry and reserve yours:
http://events.constantcontact.com/register/event?oeidk=a07e2xxrcpp0479e567&oseq
Susan Fronk, St. Paul SCORE
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July 13, 2010
Many economists have what they call a “cautious optimism” about America’s recovery. Like meteorologists, they’ve been forecasting mostly cloudy skies with a slight chance of clearing.
Some local business leaders, however, are sensing profits in the wind. In a June 24 article published in Finance and Commerce titled ‘Twin Cities’ execs see ‘turning point’ (by Bill Clements), two-thirds of Twin Cities area board members and executives expect to see increased profits in 2010 according to a survey by KPMG. The brighter outlook of Twin Cities-area business leaders is an indication that things may be turning around for mid-sized and large companies.
While no one can predict exactly when we’ll all look up and see blue skies, experts are speculating that the great recession is over. Others, especially small business owners are not so sure. As they struggle to cope with rising costs and lagging sales, many small business owners are still singing the blues. Recovery may be slower for small businesses due to several issues. Here are just a few:
- Fewer resources limit the ability of a small business to leverage opportunities
- Global competition makes winning business a lot more challenging
- Attracting and retaining talent can be more difficult for a small business
- Cost and availability of health insurance is an upward battle for small business
- Increased regulatory compliance creates adds more red tape
- New law requiring 1099s on purchases over $600 -adds a lot more administrative work
On the bright side, small businesses have several things going for them including:
- An ability to respond rapidly to market and technology changes
- More free to drop unprofitable products/services and add or innovate new ones
- Increased support from local community and economic development
- Expanding opportunities and support for international trade
- Internet marketing and social media level the playing field for small businesses
- Added support for minority and immigrant business owners
- High unemployment rate means access to highly trained and experienced talent
Another huge opportunity for small businesses is export. If you are looking for new customers, 96% of all customers live outside of the U.S. Two thirds of the world’s purchasing power lives in foreign cities. Even though small business exports represented 30 percent of U.S. exports in 2007, that is only slightly higher that it was 10 years ago according to an International Trade Commission report.
President Obama has a goal of doubling U.S. exports to $3 trillion within five years. Yet, fewer than one percent of the 29 million small businesses export. With lagging consumer spending and a jobless economic recovery, “exporting may be one of the few areas remaining where small businesses can grow right now,” said Todd McCracken, president of the National Small Business Association.
The Twin Cities-area business leaders and executives in the survey believe merger-and-acquisition as well as international expansion as key to post-recession growth. But, many small businesses are reluctant to move forward with international commerce because they don’t know where to begin. They also worry about how they will be paid by foreign customers.
According to Commerce Secretary, Gary Locke, it may be easier for small businesses that are already exporting to a single country to start exporting to others. Six out of ten exporters fall into this category. Locke has formed partnerships with FedEx Corporation and United Parcel Service to offer seminars to small businesses who are already exporting to one country.
This short video contains information on what support is available for small business exporting:
http://www.youtube.com/watch?v=UFQIAszJWn4
You can also find tips on small business strategies in our Strategies for Growth Series. Two articles specifically focus on exporting
If you want to learn more about how to start, operate and grow a successful business contact SCORE by clicking the link on the right to the office nearest you or click here to request free face to face counseling.
Have you ever considered volunteering for SCORE? Our members help millions of new or existing small businesses succeed each year by sharing their knowledge and experience. Click here or the link on the right to the office nearest you to learn more.
Susan Fronk, St. Paul SCORE
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July 9, 2010
We’re interested to know and have each other learn from this topic: “What is your biggest business challenge and how are you overcoming it?” There is a lot of power in sharing your challenges and learning from others in this community blog. So here we go:
What’s the biggest challenge in your business and how are you overcoming it?”
- Is it keeping customers?
- Is it finding new customers?
- Is it marketing and lead generation?
- Is it getting a line of credit?
- Is it managing expenses?
- Is it pricing products?
- Is it time management?
- Other?
Choose the biggest challenge for you – describe it – and then the solutions you invested in or activated to solve the business challenge. Tell us your story and share with others how you achieved success and overcame your business challenge. Possibly others will share ideas with you that you had not thought of.
LaVon Dennistoun, Minneapolis SCORE
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June 29, 2010
As an aspiring entrepreneur or small business owner, are you fighting for sales? Would you like to have a weapon that could blow your competition out of the water? Would you like that weapon to cost little or nothing? Of course you would.
Although the economy is down, business start-ups are, well, up. Statistics from the Kauffman Foundation, a think tank for entrepreneurs in Kansas City, MO, found that small business start-ups hit a record high in 2009. This certainly is the case in Minnesota. Each week, over 100 aspiring entrepreneurs and small business owners contact SCORE Minnesota for assistance.
This may sound crazy, but, the timing for small business success has never been better. Sure, money is tight, but, today, small businesses have a secret weapon. Major shifts in the business environment, including resistance to traditional (costly) advertising, have given small business one of the most powerful weapons ever invented to beat the competition; Social Media.
Imagine that you are in a fierce battle facing many foes who are a lot bigger and stronger than you. Then you hear about a powerful new weapon that has been invented that will allow you to take on even the most formidable of foes. You would probably think, “I could really use a weapon like that. Where can I get it?”
Or, maybe you are standing on the sidelines, thinking, “Social Media is just a new way to socialize”. If so, watch the videos at Hubspot and you will see that Social Media is changing, not just the way we communicate, its changing the way we market and sell.
Even if you already know the power of Social Media, you may be intimidated or confused about what to do and where to start. This is what many SCORE clients are telling us. In response to this need, we are offering a Social Media and Internet Marketing Boot Camp on Thursday, June 24 from 8:00 am to 4:30 pm at the Embassy Suites, 7901 34th Avenue South, Bloomington, Minn. Due to the intense interest in this topic, attendees are encouraged to register as soon as possible. The $99 fee includes coffee, lunch, materials and plenty of time for questions.
Loren Herbst, district director of SCORE Minnesota says, “Social Media and Internet marketing are effectively leveling the playing field for small-business owners. Today, entrepreneurs or small business owners can build a growing enterprise more cost-effectively and compete more successfully than ever before if they know how to use social media and Internet marketing.”
“Social media and Internet marketing tools are hot because they require little or no investment to generate big results, but small business owners are not taking advantage of them because they don’t know how,” says Herbst.“Lately, it seems that everybody has become an expert. However, just because someone knows how to create an account and use the features on LinkedIn, Facebook, Twitter and other social-media tools, they may not be experts in marketing. When social media and Internet marketing fail to produce results, it is generally due to a lack of a sound marketing strategy.”
“Minnesota small businesses can avoid making this mistake by attending this seminar. Presented by marketing experts, attendees will learn how to use social media and Internet marketing strategically to generate sales and expand their businesses.”
The daylong seminar, sponsored by six local SCORE chapters, is designed to help entrepreneurs and small-business owners build their business with tools of little or no cost. Entrepreneurs from across the state are expected to attend and will receive practical knowledge, strategies and tools to generate leads and revenue from the Internet.
SCORE, a non-profit organization and resource partner of The Small Business Administration, has been providing no-cost business advice and low-cost entrepreneurial training on starting and growing a small business since 1970. In 2009, more than 400 Minnesota SCORE volunteers helped over 5,000 Minnesota entrepreneurs with no-cost mentoring and advice.
If you want to learn more about how to start, operate and grow a successful business contact SCORE by clicking the link on the right to the office nearest you or click here to request free face to face counseling.
Have you ever considered volunteering for SCORE? Our members help millions of new or existing small businesses succeed each year by sharing their knowledge and experience. Click here or the link on the right to the office nearest you to learn more.
You can also connect with SCORE in their LinkedIn Group and on Twitter. More information about SCORE is available by clicking the SCORE ‘tab” above.
At the least, allow me to invite you to our new LinkedIn group, “Minnesota Small Business – Powered by SCORE”. In the group you will have the opportunity to meet many of your peers (other small biz owners) as well as many of our SCORE counselors. The group is a great forum for asking or answering questions or simply commenting on posts by others. Join us today.
SCORE Minnesota,
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June 21, 2010
As Chairperson of the Minneapolis Chapter of SCORE, I have the privilege and thrill of helping aspiring entrepreneurs and small business owners turn their ideas into successful businesses. However, I also have a ring-side seat when those ideas fail to materialize. Still, when a small business succeeds far beyond expectations, it is truly the stuff (or stuffing, as it were) of dreams. Here is one such story.
John Sortino noticed that all of his son’s stuffed animals were made in other countries. The more he thought about it the more he inspired he became to create an American made teddy bear. And, the rest of the story , as Paul Harvey, the legendary radio personality and commentator used to say, is history. Sortino founded the Vermont Teddy Bear Company in the early 1980s.
Sortino’s concept was original in that his teddy bears were customized and shipped via “Bear Grams”. As a result of the “one of a kind” nature of the products and the clever method of delivery, the company ran memorable radio ads and offered a wide range of gift options. While you might say the Vermont Teddy Bear Company is “the stuff (ing) of dreams”, it was certainly no piece of cake for Sortino.
As an entrepreneur, Sortino had to overcome many hurdles before his company achieved the success it enjoys today. When Sortino needed help, he turned to his local SCORE office. One of the huge hurdles Sortino had to overcome was a reluctance on the part of local retailers to carry his hand-crafted teddy bears. This inspired him to try selling them from a pushcart in Vermont’s well known downtown marketplace in Burlington, Vermont. Sortino’s SCORE counselor turned out to be instrumental in helping him develop his push cart operation into a small manufacturing operation which wholesaled his teddy bears to small specialty stores. Of course, ultimately, Vermont Teddy Bear grew into a national franchise.
When Sortino wanted to build a new factory to meet increasing market demand, he called SCORE once a gain. His counselor was Al Huber, an expert in factory operations. Al helped Sortino set up the manufacturing process for making bears.
The Vermont Teddy Bear Company was nationally recognized by the 1990s. In no time at all (or so it seemed) this privately held business became a public, ranking 21st in 1994 as one of the fastest growing public companies according to Inc. magazine. Since then, the company has added online shopping and increased the range of its products.
After leaving the Vermont Teddy Bear Company in 1995 to pursue other interests, Sortino is a successful business consultant. He is the author of the Complete Idiot’s Guide to Successful Entrepreneuring, now in its fifth printing, is planning a series of business books for young people. Sortino says this to say about business and SCORE:
“Having a business sounds like a wonderful dream, but it’s really very tough. You’re by yourself, your plans may not be working out and you’re trying to figure out how to solve problems or keep things growing. When possible, people should talk to SCORE counselors and get different perspectives, because they have so much information and experience to share. It’s like the gods of business coming in to help you be successful.”
Of course, every aspiring entrepreneur and small business owner dreams of the kind of success that John Sortino achieved. Regrettably, a high percentage of them won’t even come close to the Vermont Teddy Bear Company. But, you can follow John’s example and contact SCORE for free mentoring and advice. SCORE also provides low-cost training on how to start-up and grow a small business.
If you want to learn more about how to start, operate and grow a successful business contact SCORE by clicking the link on the right to the office nearest you or click here to request free face to face counseling.
Have you ever considered volunteering for SCORE? Our members help millions of new or existing small businesses succeed each year by sharing their knowledge and experience. Click here or the link on the right to the office nearest you to learn more.
You can also connect with SCORE in their LinkedIn Group and on Twitter. More information about SCORE is available by clicking the SCORE ‘tab” above.
At the least, allow me to invite you to our new LinkedIn group, “Minnesota Small Business – Powered by SCORE”. In the group you will have the opportunity to meet many of your peers (other small biz owners) as well as many of our SCORE counselors. The group is a great forum for asking or answering questions or simply commenting on posts by others. Join us today.
Randi Luoto, Minneapolis SCORE
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June 17, 2010
Last week I posted an article describing the first step to getting involved with social media titled, “Social Media: Are You Listening?” Now that you are listening, this article will describe the next step, which is reaching out to connect and build relationships with people online.
It always surprises me when I hear from otherwise savvy business people that they want to limit their online relationships to people they know. Most people who understand marketing feel it is a good thing to expand your influence in the world which is one of the most powerful benefits of social media. The online networks that an individual or company builds with social media tools are called social communities.
For those of you on LinkedIn, your “contacts” (however many you have) are a community. For those of you on Twitter, your “followers (however many you have) are a community. For those of you on Facebook, your “friends” (however many you have) are a community. And so on.
As you build your network or communities, you will need to decide with whom you want to connect. Keep in mind that, in general, the larger community you build around a specific social media tool the more effective that tool will become. So there is no good reason to not connect with anyone. Should you happen to connect with someone who turns out to be problematic in the case of those who send unsolicited advertising messages (spamming), you can always disconnect, unfriend or unfollow them.
Just because you accept most invitations to connect, it doesn’t mean you should invest your time seeking out just anyone with whom to connect. Time is one of the most valuable assets you have. Building social networks and producing results through these networks takes time. Therefore it is important to use your time wisely. After all, a community or network with thousands of people where none of them are your prospects is of little value to you.
So, the first place to start is by defining your prospects by age, gender, geography, education, profession, income, marital status, gender and lifestyle. Once you have defined you prospect, now you have to locate them online.
A good place to start is to learn the search function for each social networking tool. These search functions can be a bit more complex than just typing something like “leaky pipes” if you are searching for plumbers. Learn what advance search techniques are available for each tool. Let’s use LinkedIn for example. Their advance search feature allows you to find people by any or all of the following criteria:
- Keywords
- Title
- Industries
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- Location
- School
- And more!
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Each social media tool has different search features. Chances are there is a YouTube video that will explain it to you. There are other free social media tools to help you as well. If you are a local business and want to find local Twitter users, one way to accomplish this is with TwellowHood (they fancy themselves as “The Twitter Yellow Pages”).
There is also software you can purchase like TweetAdder that will search for a keyword in the user’s profile, or in the tweets within a specific geographic area. You can even search for users with a certain number of followers. Or you can even target a specific user (possibly a competitor) and TweetAdder will automatically follow their followers. Its wild, isn’t it?
Another way to find prospects with whom to connect is to join groups where your prospects hang out. As I mentioned in last week’s article, it appears that Yahoo now has 17 million groups (if that is even possible), Google has over 4 million and LinkedIn has over 600 thousand. There are groups about everything you can image. Find the groups that your prospects hang out in and you will find many people with whom you can connect.
As it relates to social media marketing, the value of a connection who is also a prospect is much higher than that of a connection who is not. But, there is a connection with an even higher value. These high value connections are called “third-party influencers” or “trust agents”. Others call them “brand ambassadors”. If you can connect with these people and build a relationship with them, they will help you meet your objectives.
When using social media, always share information that interests others first; share information about yourself or business last. A good ratio is 12 to 1 if you want to gain trust and credibility. Additionally, talk up competitors and/or competing products, which will add to your business’s credibility. Talking up competitors/products is not only a courtesy but a reality.
In a recent seminar an example was used of the CEO of a Japanese electronics company who, during a public meeting, brought out a competitor’s product and admired it in front of all in attendance. The CEO owned the competitor’s product and used it in addition to the products his own company offered. The reality is that customers in many cases have a complementary mix of products from more than one company of the same product family.
So, which social media tools will you use to build your communities? The demographics of the users of each tool are different and they may surprise you. Here are some facts about Twitter, statistics for Facebook and demographics for LinkedIn. You can find much more information on the web if you search for it. Match the demographics of your prospect with the demographics of those using the social network working tools and it will become much clearer which tools are the best for your situation.
In the weeks that follow you will learn a lot more about social media and other topics from me as well as other SCORE counselors. However, if you don’t want to wait to learn more about social media, you have a couple of options. At any time you desire, you can request face to face counseling and/or mentoring by clicking the link on the right to the office nearest you or click here.
A second option for those of you who want to know more about how to achieve results by incorporating social media into your marketing strategy is the new seminar SCORE has developed. The seminar focuses on many aspects of social media that are typically glossed over or omitted in other seminars because their goal is to recruit attendees as clients. Because this topic is so important for small business we have gone to extraordinary lengths to select some of the top online marketing consultants in our state who also possess a high degree of expertise in social media. These presenters will share their considerable knowledge and experience in our “Social Media & Internet Marketing Boot Camp” on June 24. If you would like more details on this seminar and/or our social media and internet marketing presenters, simply visit our registration page by clicking here.
If you are a marketing professional with proficiency in the use of online marketing and social media, I would like to encourage you to consider volunteering for SCORE. We are a non-profit organization that helps millions of new or existing small businesses succeed each year by sharing our knowledge and experience. Click here or the link on the right to the office nearest you to learn more. We would be happy to have you on our team.
At the least, allow me to invite you to our new LinkedIn group, “Minnesota Small Business – Powered by SCORE”. In the group you will have the opportunity to meet many of your peers (other small biz owners) as well as many of our SCORE counselors. The group is a great forum for asking or answering questions or simply commenting on posts by others. Join us today.
Mike Clough, St. Paul SCORE
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June 15, 2010
Last weekend, I was inspired to write this article by a feature I saw on the CBS Sunday Morning television show. The feature was an interview with Tony Hsieh, CEO of Zappos, an e-commerce company based in Henderson Nevada that sells shoes, handbags, clothing, eyewear, and accessories. Tony’s newly released book is titled, Delivering Happiness: A Path To Profits, Passion, and Purpose. In his book, Tony describes how he was able to make his 1999 start up so successful that Amazon ended up purchasing it for $1.2 Billion.
One key to Tony’s success is his belief in promoting customer AND employee happiness. To keep employees happy, Zappos pays 100% of the cost of their employees’ health insurance. They also provide meals for their employees. This approach apparently is working because Zappos tested employee loyalty by offering employees up to $3000 to quit and they didn’t.
These days, many employers are not as concerned about retaining employees as they are about retaining customers. When customers can easily find and purchase similar merchandise online with a few clicks of the mouse, lifetime loyalty seems unrealistic. Remember, your toughest competitors are out to steal your best customers.
In contrast to most customer service policies requiring employees to resolve customer issues within a couple of minutes, Zappos employees can talk to customers as long as it takes to make them happy. The longest reported customer service call lasted 5 hours and 57 minutes. Obviously, Zappos feels it is in their best interest to satisfy their customers no matter how much time it takes.
According to Wikipedia the terms, customer lifetime value and “customer life cycle management” represent the lifetime value of a company’s customers. Anyone who has been in business knows that it is far more difficult (and costly) to find and sell to new customers than it is to existing customers. The key to retaining customers is something small business owners do pretty well: building customer relationships. Having good relationships with your customers motivates them to want to do business with you and your company, not the competition.
If you can build a big enough base of loyal customers, your business will be more successful in the long run. If you can sell to folks who already understand and appreciate the value of your products, you will achieve greater efficiency, predictability and profitability.
You can spend like a drunken sailor to attract new customers, but if they don’t stick around, your days could be numbered. The following tips can help you increase the lifetime value of your customers.
Tip number one: when a customer leaves, you should pay close attention. You need to become a detective and discover why it happened. Then, you need to fix the problem as soon as possible. The main reason you want to do this is to make sure you don’t lose anymore customers. Also, if you can turn an unhappy customer into a happy one, you have an opportunity to create a loyal customer for life.
Tip number two: capitalize on the simple art of relationships. For example, do you thank your customers for their business? Have you ever tried going beyond a letter, survey, or phone call to send a thank you note or a letter? If you make it personal and sincere, they will remember it. The more impersonal our communications have become as a result of technologies like email, text messaging and tweeting, the more it will mean to your customers when you communicate personally.
Tip number three: create value for your customers. No doubt, your customers have many needs that you are not currently serving. If you ask your customers what else you could be doing for them they will tell you. Then, you have the choice to meet their need yourself or find a strategic partner who can.
Tip number four: make it easy for your customers to do business with you. Evaluate each experience your customer has with your company including phone calls, Web visits, sales calls, your store, or your office to see if it is as convenient and pleasant as it can be.
Tip number five: offer incentives. Of course, you don’t want to bank you company’s future on buying customer loyalty, but you can sweeten the pot. By offering special perks, discounts or freebies, you can make it easier for customers to stay loyal.
If you want to learn more about how to start, operate and grow a successful business contact SCORE by clicking the link on the right to the office nearest you or click here to request free face to face counseling.
Have you ever considered volunteering for SCORE? Our members help millions of new or existing small businesses succeed each year by sharing their knowledge and experience. Click here or the link on the right to the office nearest you to learn more.
Susan Fronk, St. Paul SCORE
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June 11, 2010
As entrepreneurs and small business owners make the decision to become involved in social media marketing, the first question they ask is, “where do I start?” For some, social media can be a bit intimating. Over the next few weeks I will be posting articles on social media that should help make it less intimidating. In my experience, once someone understands social media, starts using it, and sees what it can do for them, they love it.
If you are interested in learning more about social media and other issues that are critical small business, I would encourage you to subscribe to this blog so you can receive email updates each time a new article is posted. All you have to do to subscribe is click here and provide your email address. You will receive a confirmation email asking you to confirm that it was you that submitted your email address. We promise to use your email only for this purpose and we will not share it with anyone else. Of course, you can unsubscribe any time you desire.
So, where do you start? Well the first step is to LISTEN. I don’t mean you should listen to me, I mean you need to start listening to what people are saying online. Allow me to share a quick story with you that will illustrate what I mean.
Back in the mid 1970s, while my car was in the shop, I car pooled with an associate to a meeting that was over an hour away. We were running late and my associate decided that since we were on a freeway, it was necessary to break the speed limit if we wanted to arrive on time. So, he stepped on the gas and then reached for a device that I later learned was called a “Citizen Band Radio” or CB. On our way to the meeting, we listened to many conversations over the CB radio that I never knew existed. In retrospect, I think this might have been the first social media device ever. Other CBers told us where the “Smokey’s” were located so we wouldn’t get caught speeding. There were many other conversations taking place, some were interesting to us, some were not. Some conversations were even about us. I was so impressed that after picking up my car, I immediately stopped by an electronics store and bought a CB for myself.
Right at this very moment, people are having conversations online about problems that your products or services can solve. Wouldn’t you like to know about these conversations so you could get involved and offer them a solution? In fact, some of your customers are online right now, talking about you, your company and your brand as well as your competitors. Wouldn’t you like to know what they are saying?
What if you had an unhappy customer and they went online and told others about it? It only takes a few hours for tens of thousands of other people to hear about it. How will that affect your business? What if you had more than one unhappy customer? What if you had 5, or 10? Imagine how fast information can travel with social media. Wouldn’t it be advantageous to be able to identify your unhappy customers, make them happy and turn them into brand ambassadors while the rest of the online world is watching? You can, just by listening.
Of course, you are probably wondering, “with hundreds of thousands or even millions of messages being sent online daily, how can I possibly sort through the messages I don’t care about and find the ones I do?” You’ll be happy to know that there are social media listening tools to help you with this.
Many of these “listening” tools are free. Other great “listening” tools are available for a small fee. I recommend starting with the free tools and once you become familiar with them you can consider the additional value of those that have a minimal fee. Here are some that are free.
- Google Alerts (for blogs, websites & public forums)
- GigaAlert (Similar to Google Alerts)
- TweetBeep (for Twitter)
- SocialMention (for Twitter, reviewing sites, Facebook, etc.)
- backtweets (when specific blog and web pages are tweeted on Twitter)
- UberVU (covers many of the ways people communicate online)
You should sign up and all of the free tools because they won’t catch every conversation. One may catch something that another one misses. You will then receive emails from these social media tools with the messages they picked up by listening online. Now that wasn’t too tough, was it?
Well, there is a little more to it as many conversations go on behind closed doors where these tools can’t “hear” them. These conversations are taking place in private “social” groups and forums. It appears that Yahoo now has 17 million groups (if that is even possible), Google has over 4 million and LinkedIn has over 600 thousand. Sound overwhelming?
Not really. Close to 75% or 80% of these groups have less than ten members because anyone can start their own group for free and there is no guarantee that anyone will even join. However, there are some groups that have hundreds of members. Others have hundreds of thousands of members. You should only concern yourself with the groups that have a larger membership.
These online groups are categorized by industry, geography and special interest. All you care about are the groups where your prospects and customers are members. This will dramatically reduce the number of groups you should consider joining. By joining the groups where your customers and prospects hang out, you will receive a daily email with information about the kinds of conversations members are having.
On the topic of groups, we started a LinkedIn Group a couple of weeks ago for Minnesota entrepreneurs and small business owners as well as SCORE counselors. This group is where business issues are discussed, where members can give and receive advice, and where you can network with other Minnesota business owners and SCORE counselors. It is called “Minnesota Small Business – Powered by SCORE” and we already have over 100 members. Why not come join us and check it out. We will make you feel right at home.
So, the first step in getting started with social media is to listen. In our next post on social media we will share the second step. If you have questions, comments or suggestions, please don’t hesitate to comment below.
If you would like additional help with social media and don’t want to wait for the rest of our series, why not join us for the big summer social media event, “Social Media & Internet Marketing Boot Camp”? This is an all day event on June 24th at the Embassy Suites Minneapolis Airport. Our presenters are not only savvy about social media, they are highly regarded for their marketing skills and will be sharing their considerable knowledge with you. For more details on the seminar, our presenters, and the topics they will be covering, just click here. Seats are going fast!
If you are a marketing professional with proficiency in the use of online marketing and social media, I would like to encourage you to consider volunteering for SCORE. We are a non-profit organization that helps millions of new or existing small businesses succeed each year by sharing our knowledge and experience. Click here or the link on the right to the office nearest you to learn more.
Mike Clough, St. Paul SCORE
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June 8, 2010
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