Start-Up Basics

For many, owning their own business is as much a part of

the American Dream as owning a house or vacationing at

Disney World. But most people don’t know where to begin.

And over 50 percent of all new businesses fail in the

first year alone.

Barry Bendes, a partner in the New York City and Short

Hills firm of Edwards, Angel, Palmer & Dodge, has a

specialty in getting small businesses off to a good start.

"The key is that people need to plan for success," he says

(U.S. 1, March 1, 2006). Specifically:

Find a good accountant. Bendes is an attorney, but still,

he says that "the most important thing that I tell people

is to go out and get yourself a good accountant. It is

much more important than getting a good lawyer." Do this

before renting space or incorporating, he says. A thorough

consultation should take place well before any business

cards are printed up.

Plan ahead. What sort of business are you interested in?

What is the current market? What about short-term and

long-term success? "Planning is king and the second most

important thing is to make a good business plan," says

Bendes. "It serves as a tool to help get started and well

as measuring your path to success as you go along."

Maintain a positive attitude. Owning your own business is

time consuming, and a huge amount of work. Despite the

time commitment, rewards are rarely immediate. There will

be times when the new business owner will doubt that what

he is doing is worth it. But Bendes says that successful

businesses are started every day and it’s important to

keep a good outlook. "The more you plan for success," says

Bendes. "The better your chances are of having success."

Think Twice Before Adding Staff

Employees? Who needs them? Terri Adams has managed to

avoid hiring a single one as principal of Adams Consulting

Group, based in her Princeton home


It’s not that Adams advises owners of small businesses to

do it on their own. What she has done herself – and

preaches for others – is the development of strategic

partnerships to provide help when it’s needed. For Adams,

networking at chambers of commerce and similar

organizations doesn’t mean just looking for potential

customers. She also keeps her eyes open for people whose

business strengths and knowledge areas complement her own

(U.S. 1, February 22, 2006).

One of her partnerships is with someone Adams met through

the Princeton Chamber who develops promotional products. A

big part of her business comes from corporations who ask

her to do training for a big product launch or a new

initiative. If these companies are also looking for a

package that includes promotional products to symbolize

the new product line or vision, then Adams turns to this


This way she can deliver what she calls a "more holistic

proposal." And it turns out to be cheaper for the client

than an "a la carte" approach. Because she uses this

partner exclusively when she needs promotional expertise,

he also gives her a special discount that she can pass

along to the customer. In return, says Adams, "each time I

have an opportunity to refer or integrate promotional

products, he will get the business." The cycle continues

when a client contacts him with a new initiative, and he

might ask, "Who is helping you to launch this new product


Based on her own experience, Adams offers this advice

about partnering to other small business owners:

Go for the big contracts. Even though you are small, you

don’t have to limit yourself to small contracts. "With

partnering," she says, "you can deliver a more

well-rounded product rather than try to get a sliver of

the pie." Suppose you write marketing copy and someone

needs a website. You’re good on the words, but you may

need a designer who knows how to position copy in a

user-friendly way, and you may also need an website

optimizer, who will put in key words so that search

engines call up the site. Tapping these partners means

that you may be able to get a big contract that you never

could have gotten on your own.

Find partners before you lose business. Small operators

can lose contracts either because they are perceived as

too small to handle a large contract or because they don’t

have available skills complementary to their own. Asks

Adams: "Moving forward, are there likely partners you

could be scouting out now?"

Don’t expand your company. Expand your network of partners

instead. Remember that business is cyclical. If you hire

when you are in the middle of a crunch, those employees

may have little to do when business slows down.

Befriend big business. Many large companies cannot be

bothered with small projects, and, in part because of

their high overhead, need to charge top-of-the range fees.

Still, they want to hang onto customers. The solution can

be to refer customers with small projects to trusted

owners of small businesses, who are happy to take on the

small projects, and who are able to charge less for doing


As an example, Adams says that a big accounting firm with

high fees may have a continuing alliance with a smaller

firm that is more affordable for certain customers.

Share the cost of doing a trade show. With charges of

$1,500 to $3,000 for a booth, trade shows may be beyond

the means of small businesses. One option for two

businesses that sell different things to the same audience

is to share the cost and the leads generated.

Seek out complementary partners. Ask yourself, "What other

services would round out what I do?" One potential partner

for Adams was a staffing agency, because its clientele was

similar to hers. "Their target is human resource

departments who either manage temporary or part-time

employees or place full-time employees," she says.

"Sometimes in my business, the human resource area is my

main partner in establishing a new initiative like

management development."

Determine whether a potential partner is the right

partner. If you meet someone at the Princeton Chamber, for

example, ask yourself not only whether you like them, but

also whether you trust them. Ask who else they know in the

chamber, and then talk to those people. If you get a good

feeling, and have done due diligence, then go ahead.

Start very small and see how it goes. If the person seems

substantial, honest, and ethical, then propose something

low-risk – like sharing a single lead. If it works out on

a small scale, go larger. The next step may be to share

five other contacts or to move to more substantive

sharing. Adams tried out her promotional products partner

with a growing bank, which was instituting a new

management development program. "It was a small project

and went well," says Adams, "and he gave me a good price."

Slowly they have been expanding that partnership with

riskier ventures that require a larger up-front


Make sure each person’s tasks are defined. Set

expectations about what the goals are and what each

partner expects to gain. Partners must also decide how to

measure what each one is doing and how to determine

whether their collaboration has been a success. Make the

goals specific. In this project, the partners’ goal is to

cover costs and get "great testimonials" to use in

marketing their next webinar.

Draw up a contract. Make either a formal or an informal

agreement, depending on the level of partnering. If there

are a lot of dollars at stake, Adams advises involving

legal counsel. For the bank’s promotional products, she

and her partner had a one-page agreement specifying the

discount Adams would get, and the discount he will get if

he refers her or if they land a joint project with one of

his clients.

"If money is at stake, people are greedy," says Adams, so

agreements must be made in advance. An agreement should

also include liability and insurance.

Too Old To Start? Never, Not Even at 93

`You’re going to invent radium, or I’ll pull your hair,"

Clara Schmitz loudly pronounced to her daughter Doris.

Young Doris tried to explain the difficulty of this task –

basically, Madame Curie had already made that discovery.

But her mother was having none of it. She had high

ambitions for her daughter. And while Doris was unable to

discover radium, she racked up impressive achievements,

including founding a national company based on her own

invention, and shepherded it to success – beginning at age


At the age of 93 when we caught up with her last year,

Doris Drucker, widow of world renowned management

consultant and economist Peter Drucker, is an author,

inventor, scientist, and entrepreneur. Throughout her

career, she has consulted with many startup firms, helping

them bring new inventions to market. Her recently

published autobiographical book, "Invent Radium: Or I’ll

Pull Your Hair," is an account of her youth in Germany

(U.S. 1, March 29, 2006).

Visivox launched. Throughout his career, Peter Drucker,

author of 35 books and prime shaper of American management

theory, was always invited to speak somewhere. "It became

my job to sit in the back of the hall and yell louder!

when his voice started to drop," recalls Doris Drucker,

"and I want to tell you, having heard these talks dozens

of times, I was really getting tired of it."

Surely, she thought, there must be a better voice feedback

method. So, finding nothing available on the market, she

invented one. Her solution, Visivox, was a small device

that attaches to a podium and translates the speakers

voice volume into a series of warning lights. The speaker

can thus project the proper voice volume to match the


Partner up. "Nobody knows every part about starting a

business," says Drucker. "You really need to find and

bring in good partners who can help you." Drucker, quite

naturally, turned to her husband. He had, after all,

guided the world’s major businesses, and revamped the

country’s view of business management. "So I asked for his

help," she recounts, "and he says, `oh, I don’t know

anything about small business.’"

Undeterred by her unhelpful hubby, Drucker partnered with

an electrical engineer and, by l996, at the age of 84, she

was ready to bring her invention to market, and carved out

enough space to get it off the ground. "Every entrepreneur

needs one to two years of food and shelter money to get

started," says Drucker. "You have to have your time free."

Key marketing problem. "Inventing’s easy. It’s the

marketing that’s hard," says Drucker. She had a product

for which there was no known competitor – seemingly a

perfect niche. But Visivox faced a far larger hurdle than

competition. "Speaker ego was my biggest problem," says

Drucker. "Every speaker behind every podium thinks his

voice fills the room. They don’t care about draperies or

different acoustics, they think their voice covers it."

Yet with a lot of intense marketing, Visivox came to be

recognized as a valuable tool. Hotels and universities now

equip their podiums with the device and preachers have

come to accept that the faithful can get the message only

if they can hear it. Speech pathologist George Whitmore of

San Bernadino’s Casa Colina Center for Rehabilitation

Medicine has found Visivox to be an ideal

non-interruptive, self-monitoring tool for his

brain-injured patients, helping them to learn how to speak


Insure Key People

What do Rita Hayworth’s legs and your trusted CFO John

have in common? Both are valuable, irreplaceable business

assets, worthy of insured protection. If John gets hit by

a truck, both you and his widow may weep copiously at the

funeral. But come Monday, it’s back to business, and with

the sudden realization that he has passed on without

passing on any of your company’s financial information, a

very tangible sense of his loss will hit home.

Insuring against lost time, expertise, and sales until a

replacement can be found and trained typically has been a

consideration mostly for major corporate CEOs. Yet more

often it is in the smaller firms that a handful of

individuals hold irreplaceable knowledge or abilities.

Gwen Faulkner, financial service professional with the

Cherry Hill office of the MassMutual Financial Group,

speaks to specific insurance strategies (U.S. 1, June 28,


Insuring key people has traditionally been seen as a

compliment conferred by the directors and received as a

status symbol by the executive. In smaller firms, such a

policy, if employed at all, is generally taken out only on

the owner. "But rank or past performance have nothing to

do with key person insurance," insists Faulkner. "It is a

matter of determining the individuals whose sudden loss

would effect the bottom line." These may not necessarily

be partners or upper management people.

Supposing a firm’s young sales manager provides excellent

motivation and training for his sales force, and sales

figures show that an amazing two-fifths of annual sales

come from one aging senior salesman. Loss of the manager

would entail a relatively short replacement time, with a

small dip in revenue. But losing that senior salesman and

all his clients might nearly sink the ship. Which of these

two should be insured?

He’s worth what? Unlike a movie star’s body parts, a

business person’s worth is fairly easy to calculate and

less personal. The very first step before any insuring is

to get an outside valuation of the company.

"This should be the real value of the firm," says

Faulkner, "not the under-valuing that we so often do for

the IRS."

Once the actual company’s value is determined, any

individual’s percentage of that value becomes more

apparent. In the case of a salesperson, it is easy to

judge his annual revenue stream and figure the cost of,

for example, a half-year’s replacement time. For a design

engineer who is continually turning out new products,

worth must be calculated in terms of the whole company’s

profit picture.

Faulkner continually warns clients that insurance demands

a constant reassessment of corporate value. Benefits for

key person insurance depend not only on company growth,

but also on the relative value of the insured individual.

Insurance as perk. Blending key person insurance in with

the rest of the benefits package transforms a company

safety net into a real hiring lure. For that trusted CFO

to be worth anything to the firm, he must not only be

alive, but also fit, alert, and able to sit at his desk

and perform. This means that an increased health insurance

benefit for that CFO is a wise investment.

Similarly, such additional insurances can be applied to

that person’s pension plan at minimal cost.

"The whole trick to key person insurance is flexibility,"

says Faulkner. "Every insurance company has standard

formats, yet in each case the terms are something the

company can design." Blending in such additional coverages

with the compensation package may tip the scales in your

favor when top managerial talent is looking for a new


Buy-sell hedges. Business auction ledgers are rife with

tales of partnerships reluctantly put on the block so the

remaining partner can come up with the cash to satisfy the

heirs’ inheritance. Whether the business has boomed or

remained steady, partners’ fortunes tend to be fixed to

their company’s growth. Thus, they seldom have enough

capital to buy out the other partners’ shares.

A simple buy-out insurance plan on all the partners

ensures that any surviving partner can pay off the heirs’

share without dissolving the business. Premiums here tend

to be quite affordable. Yet before plunging into such an

agreement, Faulkner suggests each partner get to know the

heirs. Does each partner even have a will? Are the heirs

interested in participating in the business, and is it

worthwhile to bring them aboard now?

"I’ve seen people insure their pets for $100,000," says

Faulkner. "Hopefully, your key people are worth at least

as much."

Prepare for Disaster

Forty percent of businesses that experience a disaster

will not recover from it, according to statistics from the

New Jersey Small Business Development Center. What can you

do to make sure that your business doesn’t become a


A large part of disaster preparedness is really just good

business practice. Jeff Perlman, principal of Borden

Perlman Insurance, with offices at 2850 Brunswick Pike,

says that "typical risks in New Jersey are flood, fire,

and wind." But a disaster for a business can range from

major natural disasters to seemingly minor incidents such

as a computer crash. A minor accident can become a major

disaster for an unprepared business. Some precautionss:

Find a back-up location. "The biggest factor in whether a

business recovers from a disaster is how quickly they can

get back in business," says Perlman. Having a secondary

location to move to can be the difference between the

ultimate success and failure of the business. For a

business that needs only a small space, this may be

accomplished quickly and easily. But other businesses, an

auto body shop for example, have larger and more specific

space and equipment issues to deal with.

Large corporations often have back-up facilities, a luxury

that few small businesses can afford. But Perlman says

that there are ways that even the smallest company can put

a contingency plan for back-up space into effect. He

suggests, for example, that a company can develop an

agreement with "a friendly competitor" in a nearby town.

For some businesses, sharing office space for a time may

be possible, for others, the agreement might mean that

customers are sent to the competitor’s shop until the

business is running again.

Have the proper insurance. When people think about

insurance, they think property damage, says Perlman. "They

want to be insured in case the roof blows off the

building." Property insurance will cover the new roof, but

what about the business that is lost while it is being

repaired? A second type of insurance, business

interruption insurance, will cover the loss of income from

a disaster. Business interruption insurance can save the

day after a fire or a tornado, but, Perlman warns, "this

type of insurance is not readily available in the case of

flood damage."

Flood insurance is the third type of insurance a business

should consider. Who needs flood insurance? "After that

last few years, I’m beginning to think everyone in New

Jersey should have it," he says.

Take care of your data. Whether your records are on

computer or are in hard copies, keep all of the back-up

copies you need to run your business in a safe location,

preferably somewhere other than your office.

For a small business, with fewer than 10 computers,

protection from crucial data loss can be as simple as

backing up to a read/write DVD once a week, then storing

that DVD at home, or in some location far away from the

computers themselves. Larger companies, with more

computers, may need to take greater measures, such as a

backing up to a different server that is in another


Document your physical assets. Just as many prudent

homeowners do, it’s a good idea for a business owner to

make a list of all of his business equipment and of any

inventory. Even better than a list is a videotape, which

provides a visual record of hard assets.

Keep insurance records safe. In case of a disaster, you

will want to get in touch with your insurance companies

quickly. Keep copies of contracts and agents’ contact

information at an offsite location.

Pinpoint employees. In a disaster, it is possible that

employees will have to scatter. Make sure to keep a list

of emergency contacts, including the home and cell phone

numbers of all employees and of their back-up contacts.

After you have completed your disaster preparation plans,

call around and make sure that the people you do business

with are also prepared for disaster. If your key vendor

has a disaster, will you be able to get the supplies you

need? If it is something that is vital to your business,

make sure you have another source for it.

Low Cost Marketing For Start-Ups

`We are in probably the most competitive marketplace I’ve ever seen,

especially for smaller businesses," says Nunzio Cernero, who has been

involved with small businesses for over 30 years, both as co-founder

of the Small Business

Development Center at Mercer County Community College, and through his

own Brick-based business, Nunzio E. Cernero LLC, as financial planner

(U.S. 1, January 18, 2006).

Dissatisfied with the culture of larger companies – or downsized from

them – a number of corporate refugees are deciding that going it alone

is a better option. Entrepreneurial success stories are regularly

touted in the press, and classes

in how to form a business are offered nearly every week.

Often what a big business has that a small business lacks is a

significant marketing budget. Cernero says that when he first started

teaching at Mercer County Community College he would give the students

$100 million of "play money" to

develop a marketing program. By contrast, he now pushes what Jay

Conrad Levinson named "guerrilla marketing," or "grassroots

marketing." The goal, as the subtitle of Shel Horowitz’s book

"Grassroots Marketing" says, is "Getting Noticed in

a Noisy World." Cernero suggests some ways to make this happen:

Define your market. Entrepreneurs usually have a sense of who they

might sell to, but this needs to be clarified. "You don’t want to

spend money reaching out to people not in your target market," says


Get out there. Find ways to interact with potential customers or

clients in your target market. What do they read? What kind of

meetings do they go to? Who do you know who is either in your market

or who influences it? For example, if your

target market includes public relations firms, you may know a printer

who is selling to one or more of them.

Speak anywhere and everywhere. Give seminars and talks both to

consumers and business people. "I speak anywhere I can," says Cernero,

"to anyone who will listen." His one caveat is that it’s not worth

your time to talk to a group that does

not include people in your target market.

Develop a database of your target market. Include current customers,

potential clients, and opinion leaders. Track everyone you talk to or

get a business card from, entering as much contact information as you

can. Use the database to

interact with the people you’ve met. Cernero suggests sending regular

mailings to clients – birthday cards, newsletters, and announcements

of promotions – but always give people the opportunity to opt out.

Use the web effectively. Develop a website if you can afford to. Check

out new services on the web being developed by Yahoo, Amazon, and

Google that are like yellow pages and can help you find local service


Build an opinion leader network. Send useful information to opinion

leaders. For example, you might send articles to printers on effective

management of a print shop.

Join groups. Find out where members in your target market meet. If

they are chamber of commerce members, start attending meetings. If

they are passionate golfers, dust off your clubs. If they are church

goers, consider attending bazaars,

fairs, and other non-religious events.

Include some random marketing. Make it a weekly habit to pick out four

prospects, and send them each a letter and then follow up with a phone


Search for creative marketing ideas. Plug the keywords "grassroots

marketing" into Google from time to time, and check out what other

people are doing.

Blogs for Marketing

Here is what small business owners in search of a good, cheap

marketing tool need to know about blogs. They’re effective, they’re

free, and they’re a snap to set up and maintain.

These fast facts come from Janie Hermann, director of technology

training at the Princeton Public Library and an enthusiastic blogger.

In addition, she is a regular contributor to the Library Garden blog


U.S. 1, October 4, 2006).

"A blog is a way to create a web presence," she says. "It’s great for

small businesses that can’t afford a website. You don’t have to know

HTML (the language of website architecture). You don’t have to know

web design. You can be hosted

free. It’s a wonderful way to communicate."

How can you get started? Go straight to This site is

completely free and easy to use. There are competing blogging

services, including WordPress, and they have advantages, including

advanced tagging features and URLs – or web

addresses – that don’t end in But, says Hermann, for

ease of use Blogger just can’t be beat.

Blogger provides a choice of templates that allow users to personalize

their blogs. Choosing a template is the first step to blogging, and it

can be accomplished with just a few mouse clicks.

Are there any pitfalls? If you’re an employee blogging about your

company or your industry, be careful, says Hermann. Even bloggers who

post controversial material, but try to stay anonymous, have run into

trouble, typically in the form of

a go-straight-to-the-unemployment-line note. It is generally easy for

anyone with the right tools to pierce the veil behind which a blogger

might try to hide. Bottom line, says Hermann, "Don’t write anything in

a blog that you don’t want

your boss to read."

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