business
FOR THE ENTREPRENEURIAL SPIRIT
VISION
WINTER 2008
Ready, Set, Taxes
Tips for tax preparation
®
PLAN FOR RETIREMENT
Feel confident about your future
OUTSOURCING EXPLAINED
Grow your business with outside partners
BANKING Your Guide to Business Banking
TOOL KIT Products and Services
business
VISION
®
®
CONTENTS
10 Tips from entrepreneurs
and experts on how to
prepare for retirement F E AT U R E S
4 TA X SEASON SIMPLIFIED
Breeze through tax season by organizing
records, making quarterly payments
and avoiding financial red flags.
10 PRESERVE YOUR FUTURE
Don’t let business obligations deter you
from implementing a retirement strategy
that suits your needs.
14 OUTSOURCING 101
With the right outsourcing assistance,
business owners streamline and expand
their operations.
D E PA R T M E N T S
2 SMALL BUSINESS MONITOR
The importance of benefits; pet spending;
top business concerns; and more.
8 EXPERT VIEW
Author and consultant Jill Griffin provides
insight into building customer loyalty.
Banking Tool Kit 9 COMMUNIT Y IS KEY
YOUR GUIDE TO KEY BUSINESS One entrepreneur balances social concerns
PRODUCTS AND SERVICES and successful business practices while
selling greeting cards.
News From Key page B2
page B4
Checking
page B6
17 BUSINESS SPOTLIGHT
Business Debit Cards
We R Memory Keepers takes the booming
Savings page B8
scrapbooking industry by storm with fresh,
Loans and Lines of Credit page B10 innovative products.
Other Credit page B12
Key Solutions page B13
Investing Income page B14
Key Insight page B16
K E Y C U S T O M P U B L I S H I N G D E PA R T M E N T George Baer, EXECUTIVE DIRECTOR; Christine O’Connell, Valérie Vaz, COPY CHIEF AND TRANSLATIONS DIRECTOR;
Kristen Klein, MARKETING ACCOUNT MANAGER; Robin Kalin, OPERATIONS MANAGER Ray DiCecco, RESEARCH EDITOR
PUBLISHING TIME INC. MEDIA GROUP
Chris W. Schraft, PRESIDENT; Tom Stacy, VICE PRESIDENT, Wayne Powers, PRESIDENT; Leslie Picard, SENIOR VICE
CLIENT SERVICES; Hans Helmers, GENERAL MANAGER; PRESIDENT; Lisa Pols, GENERAL MANAGER
Rhonda Hargrove, EXECUTIVE DIRECTOR, NEW BUSINESS
CONTENT SOLUT I ONS DEVELOPMENT; Sinéad Whelan, PRODUCTION DIRECTOR Cover Image: BUFF STRICKLAND; STYLIST: ELODIE OZANNE FOR ENNIS
Contents: STEPHEN MALLON/STONE/GETTY IMAGES; Tool Kit: SOMOS/VEER
BUSINESS VISION EDITORIAL The copyrighted articles contained herein are provided for informative and educational
Brigid Galloway, SENIOR EDITOR; Thames Schoenvogel, Elizabeth Shepard, MANAGING EDITOR; Charlene Benson, purposes only. The opinions and views expressed by the authors do not necessarily
ASSOCIATE EDITOR; Liane Burns, ART DIRECTOR; Jeanne Clayton, CREATIVE DIRECTOR; Steven L. Mintz, DEPUTY MANAGING EDITOR; reflect the opinions and views of KeyCorp or any of its subsidiaries or affiliates, nor
does the inclusion of the articles in this magazine constitute endorsements by the
PHOTO EDITOR; Sara Cahill, Chitra K. Vemuri, SENIOR COPY EDITORS; Ann de Saussure, PHOTOGRAPHY DIRECTOR; authors or Time Inc. or KeyCorp of any of the products advertised herein.
monıtor
small business
Gender & Business
When factors such as motivation and preference are equal, an entrepreneur’s
gender does not affect the performance of a new venture. Still, according to a
recent study, male and female entrepreneurs differ in several ways:
Experience isn’t everything. Before going into business themselves,
approximately 80% of men were employed full-time. Only 57% of
women held full-time jobs.
Men tend to build; women, sell. Men are significantly more likely to
start construction and manufacturing businesses, while women are
more likely to open wholesale and retail trade businesses.
More girls follow Mom and Dad: Around 48% of male entrepreneurs
have self-employed parents, compared with 58% of females.
Source: SBA September 2007 research report
CHALLENGES AHEAD What are the biggest concerns of small and mid-sized businesses?
A 2007 survey conducted by the National Small Business Association indicates that economic uncertainty, the cost
of health benefits and the lack of available capital top the list. In comparison, finding and retaining qualified workers,
state and federal regulations, and economic uncertainty ranked highest in 2000. Still, 81% of respondents to the
2007 survey expressed confidence about the financial future of their businesses.
Source: National Small Business Association, “2007 Survey of Small and Mid-Sized Businesses”
THE BEAUTY OF BENEFITS
Question: How significantly do Administration, firms that offer ben-
employee benefits affect retention efits decrease the probability of an
rates at companies? employee’s departure in a given year by
26.2%. By the same token, benefits also
Answer: Benefits do play a role in
increase the likelihood an employee will
employee retention—an important
stay an additional year by 13.9%.
concern for businesses that want to
reduce the risk of losing valuable To learn more about employee-benefit programs offered
by KeyBank, see box on pages B8–B9 of this issue.
team members. According to a study
conducted in 2007 by the Small Business Source: SBA July 2007 research report
Funds for
Fido
Americans spent $38.5 billion on
pets in 2006, and the American Pet
Products Manufacturers Association
estimates that the 2007 total will
increase to more than $40 billion.
In 2006, owners spent:
OPPOSITE PAGE, FROM TOP: COLORBLIND/STONE/GETTY IMAGES, AKIKO KAWANIA/AMANA IMAGES/GETTY IMAGES; THIS PAGE, FROM TOP: NEO VISION/GETTY IMAGES, FOODCOLLECTION/GETTY IMAGES
$15.4 billion
on pet food
$9.3 billion
on supplies and over-
the-counter medicine
$9.2 billion
on veterinary care
$2.7 million
on grooming/boarding
$1.9 million
on purchasing animals
Source: American Pet Products Manufacturers
Association Inc.
Coffee, Please
Americans continue to spend more money on coffee, particu-
WINTER
larly coffee consumed away from home. While U.S. citizens
spent $19 billion on coffee in 2002, that number jumped
08
to $29.3 billion in 2006. Experts predict that sales will 3
continue to rise, growing to $39.5 billion in 2011. Coffee
BUSINESS VISION
shop owners are the biggest beneficiaries of this increase—their
sales grew more than 19% each year from 2002 to 2006.
Source: Tea & Coffee Trade Journal
TAXES
by Chris Warren
tax season
simplified
Prepare your business
for tax season by following a
few essential guidelines
W
hen Bob Whitaker opened several
small businesses in the early
1990s, he never envisioned that
tax preparation would become
such a time-consuming ordeal.
Whitaker, who left a sales career to start a photography
studio and a marketing business, soon faced multiple IRS
audits within just a few years.
No small business owner wants to suffer through even
one audit. Beyond mere hassle, the stakes are high when
capital and manpower are already stretched thin. For
Whitaker, though, the experience turned into an entrepre-
neurial opportunity. He delved into the minutiae of small
business tax law and created a product, the Tax MiniMiser,
08
that helps small business owners track deductions.
WINTER
By packaging the lessons he learned about tax organi-
zation, Whitaker devised a tool to save time and money
4 on tax preparation. And several years later, when the IRS
wanted to audit his records again, Whitaker was well pre-
BUSINESS VISION
pared. With his own product, he had completely organized
his tax-related documents. “The auditor went through my
records and found legitimate deductions and complete
documentations,” he recalls. “It was the ultimate test.”
PHOTOGRAPH BY BUFF STRICKLAND; STYLIST: ELODIE OZANNE FOR ENNIS
TAXES
by Chris Warren
TA XES
Keeping Track
Small business owners, even seasoned ones, often approach busi- that the IRS received it, because audits can be conducted beyond the
ness tax receipts much as they approach personal income tax three-year mark if the IRS suspects a business never fi led a return.
records. Amid daily business duties, they haphazardly collect some Retaining so many records can present storage problems, so Weltman
receipts and canceled checks and hope that they don’t owe any- suggests scanning all your tax documents and saving them on a
thing when the April deadline rolls around. That simply doesn’t DVD. If space needed for more urgent fi les is cramped, consider
cut it, says Barbara Weltman, author of J.K. renting a storage facility.
Lasser’s Small Business Taxes 2008. “The tax law For some small business owners, the task of
requires that business owners keep books and Four Business maintaining such detailed records might simply
records,” she says. “You don’t have a choice.”
Instead of occasionally throwing documents in
Deductions to be too onerous or time consuming. In that case,
experts suggest enlisting the help of a profes-
a folder, effective bookkeepers maintain current Remember sional bookkeeper.
records throughout the year. For tax purposes,
records pertaining to earned income and legiti-
mate expenses are most critical. The Schedule C
1
Carryovers from Quarterly Dues
tax form, used by sole proprietors to report busi- prior years for No matter who handles a company’s records, the
ness profits or losses, helps to identify items that net operating losses IRS requires that businesses expecting to owe at
need to be documented. Maintain expense records and capital losses least $1,000 in federal taxes pay estimated taxes on
related to inventory purchases, wages, materials a quarterly basis. Eva Rosenberg, author of Small
and supplies, lodging and travel, business interest
expense and business vehicle usage. Also keep
2
Theft and
Business Taxes Made Easy, says that despite this
requirement, far too many entrepreneurs wait until
up with income records like gross receipts and casualty losses, which the end of the year, when they don’t have enough
sales, returns and allowances as well as collected are fully deductible cash to pay their full tax bill. “They owe a sig-
state sales tax. nificant amount of money later on because they
Some business owners use a separate folder
for each month for their paper records. While
3
Interest payments
neglected to submit taxes during the year,” she
says. “So in April they don’t have the money and
collecting the documents, keep in mind that the on business they need an extension.”
IRS has specific record-keeping rules for cer- loans, including In addition to budgeting issues, missing quar-
tain deductions. Take, for example, the rules for credit-card borrowing terly estimated tax payments can lead to other prob-
deducting a business meal. “You not only need lems. The IRS may levy penalties on a business
a receipt to prove the amount of the expense,
which could be a credit-card slip, but you also
4
Incidental costs
that skips payment of estimated taxes. And failure
to track tax implications of business expenses and
need a diary or expense account statement that of business travel, income throughout the year can cloud the picture
08
shows a lot of specific information,” Weltman such as laundry of how a company is performing.
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says. “For a meal, it’s who you took out and There are some exceptions to the quarterly
why, what you discussed, when it happened and estimated tax rule, however. If a business does not
6 where you went.” make any profit one year, it may not be required to make estimated
So how long should business owners keep those documents? payments the following year. To avoid penalties, business owners
BUSINESS VISION
Because the IRS usually has three years to audit a firm, Weltman says should refer to the previous year’s tax return. If a business pays
it’s wise to keep all receipts and tax-related documents organized the same amount in estimated taxes for the current year as it did
and fi led for at least that long. But it’s also a good idea to hold on to a in the previous year (or pays 110% of last year’s taxes if income is
copy of your filed tax return permanently, along with a confirmation over $150,000), the IRS cannot penalize it.
“ Paying estimated taxes on time and being diligent about record-
keeping can reduce the chances of an audit.
Avoiding an Audit
Paying estimated taxes on time and being diligent about record-
”
Small businesses that lose money but pay employees high
keeping can reduce the chances of an audit. In addition to those salaries often attract an auditor’s attention, Rosenberg adds. “If
proactive measures, avoid activities that flag the attention of the someone is making $80,000 in a business that loses $30,000,
IRS. “Very high meal and entertainment expenses in proportion then the IRS may think it’s a hobby the person is trying to write
to your income will stand out,” Rosenberg says, “especially if the off as a tax benefit.”
expenses are greater than your income.” She also warns business Deductions related to automobiles and home offices can also
owners against claiming too much in the miscellaneous category. attract the interest of the IRS. While these can still be valuable
WINTER
deductions to take, Rosenberg says business owners should be
meticulous in documenting the reasons for such write-offs. For
KeyTax
08
instance, if you claim a home-office deduction, be sure the office is
used exclusively for your business. 7
Pay taxes throughout the year with KeyTax ®, which While few business owners will face the tax challenges that Bob
BUSINESS VISION
allows small business owners to make federal, state and
Whitaker confronted, the lessons he learned are widely applicable.
most local tax payments. For more information, visit
key.com or call 1-888-KEY4BIZ ®. Entrepreneurs who maintain organized, complete records and
handle tax payments throughout the calendar year can expect a
simple and successful tax filing.
PHOTOGRAPH BY BUFF STRICKLAND; STYLIST: ELODIE OZANNE FOR ENNIS
E XPERT VIEW
by Jill Griffin
Building Customer Loyalty
Understanding customer needs and providing
unanticipated value are crucial
“
Direct questions reveal how
customers define value. What do they like—or
dislike—about your business? Ask them to
propose ways for you to retain their loyalty.
”
C ustomer loyalty is essential to success,
whether the business in question is a
one-person operation or a Fortune 500
company. To keep customers coming
back, businesses must monitor their
customers’ definition of value and then deliver it in a way that can
be recognized and appreciated.
Four direct questions can reveal how customers define value.
First, what do they like best about dealing with your business?
Answers might range from your standard practice of returning
phone calls within two hours to your convenient location. Then ask
Research conducted in the 1980s by a highly respected Japanese
quality expert, Dr. Noriaki Kano, found that customers experience
value at three levels: basic value, expected value and unanticipated
value. Consider a hotel. Basic-value delivery means, for instance,
that after you check in, the key provided at the front desk opens
the door to your room. That’s the least hotel guests can expect,
whether at a four-star facility or an inexpensive motel.
Hotels can deliver expected value that is a notch higher through
such amenities as airport transportation, a health club or spa, and
a high-quality restaurant. But what anchors customer loyalty most
firmly is unanticipated value. Using the hotel analogy, front-desk
what, if anything, you should change about the way your business receptionists convey unanticipated value when they welcome
handles customer relationships. Third, ask about related products guests by name and learn their preferences, such as a favorite
or services your customers want. Finally, invite them to stand in room location.
08
your shoes and propose ways for you to retain their business. Small business owners can nurture loyalty among their cus-
WINTER
In addition to asking those questions, use your front-line staff tomers by delivering value on all three levels. And remember: You
to better understand how your customers define value. Front-line never get a second chance to make a first impression, so build
8 staff includes employees who work at the counter, answer the from the bottom up. If you don’t deliver basic value from the start,
phones and make deliveries. Listen to them, as their experiences chances are you won’t see that customer again.
BUSINESS VISION
can furnish many helpful insights and ideas. Meanwhile, take
time to reflect on your own interaction with customers. You may
Jill Griffin is the author of several books, including the bestseller
be surprised by what customer insights you overlooked in your Customer Loyalty: How to Earn It, How to Keep It. She runs the Griffin
haste to finish a job. Group, which works with companies to improve customer loyalty.
COMMUNIT Y IS KE Y
Hopeful Opportunities
A Vermont-based business sells
cards and helps pull women out of poverty
“
Evan Goldsmith was
passionate about his company’s
aims, but he knew he also
needed business acumen to make
the endeavor work.
”
A
Women in India use native flowers to
create handcrafted note cards.
t six years old, Evan Goldsmith join him. “My father was a logical partner because he could tap into
glimpsed his future in the pages more than 40 years of incredible business experience,” Evan says.
of National Geographic. “There Jeannie Lynch, Director of Key4Women—a comprehensive
was a feature on the Himalayas,” program dedicated to assisting women in business—met the Gold-
he explains. “The area seemed smiths after they came to Key needing banking services. “When
incredibly new and exotic, and I had a gut feeling I wanted to go I first talked with them, I thought, ‘What is it about the energy
there.” He finally did travel to the Himalayas after graduating from between these two?’ ” Lynch recalls. “Not only are they trying to
college in 1992, and the experience eventually led to the creation of change things globally, they’re doing it as father and son. I love that.”
Hope for Women, a for-profit business that pays Indian women a With Evan serving as president and David as chairman, Hope
living wage to handcraft greeting cards sold in the U.S. for Women, located in Burlington, Vermont, launched in 2004 by
Before starting Hope for Women, Evan worked in the Himalayas selling cards through a Website. Soon they began courting retail
with a nonprofit group devoted to women’s development and shops and today distribute cards to more than 250 stores through-
environmental issues. While there, he admired the beautiful out the country, including major retailers like Whole Foods Market®.
note cards Indian women were making with native flowers and Meanwhile, the women who make the cards continue to reap ben-
WINTER
plants. The women’s efforts, however, failed to generate enough efits from that growth. Evan reports that Hope for Women is now
income to live on, so they had to rely on low-paying domestic jobs able to pay the women a monthly stipend in addition to a set price
08
or subsistence farming for additional revenue. Seeing a social need per card, which gives them even greater financial security.
and a business opportunity, Evan started Hope for Women with Evan attributes the company’s success to maintaining a balance 9
a mission of providing sustainable employment for economically between social responsibility and smart business practices. “The
BUSINESS VISION
disadvantaged women. mission is part of who we are, obviously,” he says. “But it’s also
Though he was passionate about the company’s aims, Evan knew about the quality of product at a competitive price. We’ve learned
that he also needed business acumen to make the endeavor work. He that if you’re also able to embrace social concerns, such as fair trade
didn’t have to look far. Evan recruited his father, David Goldsmith, to and environmental awareness, you’ve really got something.”
BUSINES S VISION WINTER 08
10
RETIREMENT
by Randy Myers
( )
Preserve
Your
Future
Don’t
neglect
a retirement
strategy
Business owners juggle competing
demands every day, from maintaining
reliable cash flow and building cus-
tomer relationships to controlling costs
and managing employees. With so
many urgent concerns, they routinely
neglect the one that eventually may
count most: retirement planning.
While some ignore retirement
because of work’s endless demands,
WINTER
others simply love their jobs and can’t
imagine leaving. And as an entrepre-
08
neur launches a business, it’s easy
to funnel every available dollar into 11
the new venture because everything
BUSINESS VISION
depends on success. But no matter
how much is being put back into the
company, no business owner should
rule out retirement savings.
PHOTOGRAPH BY STEPHEN MALLON/STONE/GETTY IMAGES
RE TIREMENT
Nest Egg Protection
When Kathleen Spinelli launched her dream business a few years
ago, she made several smart decisions related to retirement plan-
ning. Spinelli, along with partner Robert Allen, left a corporate
publishing house career and opened Brands-to-Books, a small
publishing agency in New York City.
Like many entrepreneurs, she does not identify with the
concept of retirement, partially because of her passion for the busi-
“
I doubt I’ll ever retire
in the classic sense. Once our
small agency is running along
nicely, my goal is to continue to
be actively involved but reserve
ness. “I doubt I’ll ever retire in the classic sense,” says Spinelli, the right to go off and travel
when the mood strikes.
”
who is in her early forties. Still, she’s not oblivious to the virtues of
saving. “Once our small agency is running along nicely, my goal
is to continue to be actively involved but reserve the right to go off
—Kathleen Spinelli,
and travel when the mood strikes.” small business owner
Meanwhile, Spinelli has been carefully attending to her nest
egg. She realized that because her income would drop while the
business was getting off the ground, her retirement contributions a fi nancial planner in Tampa. Instead, he advises, “just imple-
would also decline. To partially offset that slower growth, she ment a very basic savings plan, like an individual 401(k). That
restructured her 401(k) and put a larger portion of the portfolio in will begin accumulating retirement savings even at the most
growth stocks. minimal rate and help provide a little peace of mind.” An indi-
And although Spinelli had a 401(k) in place when she started vidual 401(k) is similar to a traditional 401(k) plan but is available
Brands-to-Books, she avoided dipping into the retirement account only to small business owners with no full-time employees other
to fund the business during its first years. Instead, she and Allen than immediate family.
arranged a bank loan. That meant neither partner had to liquidate In addition to the individual 401(k) plan, a Simple IRA or a SEP
retirement savings to furnish working capital, a move that might IRA can fund retirement. The Simple IRA is for small business
have triggered twofold consequences: early-withdrawal penalties owners with up to 100 employees. Those employees, including
and the loss of a nest egg’s tax-deferred, compound growth. the business owner, can defer up to $10,500 pretax annually from
their own paychecks to fund the plan. Small business owners with
a handful of employees often opt for the SEP IRA, which is inex-
Multiple Choices pensive to set up and maintain. Participants do not contribute
If you’re a small business owner who needs every bit of capital their own income, but employers put in a uniform percentage of
to stay afloat during the first few years, you may want to wait a while each participant’s pay or a flat dollar amount.
before launching a full-blown retirement plan, says Brian Code,
08
A Late Start
WINTER
Retirement Planning Because any delay in retirement planning sacrifices time that can
12 multiply the value of saved dollars, experts always encourage early
Find a retirement plan suited to your specific situation. planning. Still, a late start does not preclude a successful retire-
BUSINESS VISION
Key’s wide array of options include individual 401(k)s,
ment strategy, as psychiatrist Raul Capitaine learned.
Simple IRAs and SEP IRAs. To learn more, visit key.com
or call 1-888-KEY-2020. Capitaine operates a flourishing multi-office medical practice
in southern Texas. Early on, he intended to prepare for retirement
once he was earning enough to comfortably support his family and
hire a few employees. But as age 60 approached without his mak- octopus analogy,”
ing formal plans, he realized that time was running out. he says. “I tell clients
“I didn’t arrive in the U.S. until my late thirties, at which there are no one-armed
point I had to be recertified to practice medicine in octopi—an octopus has eight
this country, including doing residencies and arms. Likewise, your retirement
fellowships,” Capitaine recalls. “I didn’t income should also be funded from as
open my practice until my late forties, and many as eight to 10—maybe even 12—
before I knew it I found myself in my late different income-producing sources.”
fifties without a plan.” Such sources of retirement income for
Capitaine asked his company’s accountant small business owners include Social Security,
for advice, and after carefully considering his options, a 401(k) or IRA retirement savings plan, a defined-
he settled on a defined-benefit pension plan. “We quickly benefit pension plan and real estate investments.
zeroed in on that plan because of the tremendous amount Other possible sources of income are home equity,
of money I needed to save in a short period of time,” he mutual fund holdings, and proceeds from the sale of a
explains. The defi ned-benefit pension plan enabled Capitaine business or income generated by its continued operation un-
to save more each year than he would have saved with a 401(k) der different management.
plan. He targeted a desired income level at retirement and then “Most of us are aware of the obvious income generators, such
figured out an appropriate yearly contribution to reach that goal. as the money we’ve made from the sale or dissolution of our busi-
So even though he got a late start, he still implemented a plan for ness and our 401(k) benefits,” Code explains. “But try to establish
achieving his retirement objectives. several additional sources of retirement income as planning and
investing flexibility increases over time.”
Many entrepreneurs ignore proper retirement planning either
Source Strategy because of monetary constraints or an expectation that they may
A winning strategy for small business owners is to seek multiple never leave the business. But by elevating retirement plans to the
sources of income in retirement, Code says, so that financial secu- status of other essential business decisions, small business owners
rity isn’t linked exclusively to the success of the business. “I use an can ensure a comfortable future.
An Option for the Smallest Businesses
Consider an individual 401(k) if a full-fledged retirement plan isn’t right just yet WINTER
If you’re just getting your business up directly into the plan. The individual An individual 401(k) also allows busi-
and running, the bulk of your capital 401(k) was established in 2001 but ness owners to borrow against their
08
must be devoted to your new venture enhanced in 2006 with the inclusion of savings and to save up to $45,000
and not to a multi-faceted retirement a flexible funding feature. annually pretax, as opposed to the 13
plan. But it’s relatively easy for a sole Under the new guidelines, a busi- maximum $15,500 in a regular 401(k).
BUSINESS VISION
proprietor to establish a simple 401(k) ness owner may choose to take a tax So get yourself into a smart savings
savings plan, called an individual 401(k), deduction when funds are contributed pattern by putting aside some
that allows a business owner or solo to the plan, or when the income is money—no matter how little—on
employee to make regular payments withdrawn from the plan in retirement. a regular basis.
PHOTOGRAPH BY IMAGE SOURCE PHOTOGRAPHY/ VEER
BUSINESS VISION WINTER 08
14
SLUG TK
OUTSOURCING
by Peter Strozniak
outsourcin
g
101
outside
How to develop ips that can help
partnersh
rive
your company th
At Cynthia Kay’s video production office in Grand Rapids,
six employees work under demanding deadlines to produce
corporate videos for clients as far away as Switzerland and
Germany. To create the videos, they rely heavily on high-
performance computers, servers and other technologies.
“We had an IT employee, but our technology needs
became more complicated as our business grew,” recalls
Kay, who launched her company 20 years ago. “We real-
ized it was difficult to expect one person to keep up with all
of those technology changes and requirements. We needed
another strategy.”
WINTER
To meet the demands of her business, Kay retained the
services of a local IT outsourcing provider more than a year
08
ago. Now, instead of one IT employee, her office has a team
of IT professionals who keep the equipment up to date and 15
in working order. “I see our systems running so much
BUSINESS VISION
smoother than before,” Kay says. “Our IT system enables us
to provide great service for our clients, giving them confi-
dence in our capabilities. That’s a huge selling feature that
will help our growth continue.”
PHOTOGRAPH BY JACK HOLLINGSWORTH/PHOTODISC/GETTY IMAGES
OUTSOURCING
Outsourcing may seem like a complicated proposition, but when we need them, which is far more efficient and flexible,”
investigating its potential is worthwhile. Experts suggest that Feder says. Although she pays more because of the outsourcing
you first identify the function you need outsourced, making the assistance, she believes her strategy has fueled her company’s
distinction between core functions and delegable tasks. Next, double-digit annual revenue growth.
determine specific goals you hope to achieve by outsourcing, and Other business owners outsource so they can spend on other
finally, establish a method for selecting and working with one or business duties. By hiring a company to handle human resources
more outsourcing partners. functions, for example, an owner will be able to devote much-needed
time to expanding a product line.
Find Your Focus
Understandably, small business owners often focus on selling Select the Right Partners
products and keeping the business afloat. But Andy Birol, a Finding the right outsourcing partners requires time and due dili-
Cleveland-based author and small business consultant, finds that gence. To gather a list of possible partners, ask trade associations
attention to less critical chores can sap energy best used to develop or other businesses. Interview at least three companies and focus
a business. “Many business owners spend too much time on too your questions on which metrics are most important to your
many operations because they believe they’re saving money,” he expectations. “At some point, it becomes difficult to find out which
says. But that only robs them of time that should be spent expand- partners are the best until you try them out,” Feder says.
ing relationships with current clients and winning new ones. Once you do find a partner, draft a written contract that in-
The remedy, Birol suggests, is for small business owners to cludes specifics, such as review processes and dispute resolutions.
fi nd what he calls their “best and highest use.” In his book, The 5 To be safe, hire an experienced business lawyer who can help you
Catalysts of 7 Figure Growth, Birol explains that best and highest through the process and protect your interests.
use “is the point of convergence between what you do well and When the working relationship begins, communicate and
what customers want or need and will pay to get.” To gain insight clarify all expectations from outsourcing partners. The best way to
into their best and highest use, entrepreneurs should identify the prevent misunderstandings is never to assume anything, advises
duties they enjoy most and accomplish well. Birol says that an Feder. When something goes wrong, finger-pointing is a waste of
owner should also determine why clients like the company. Then, time. It’s better to investigate the source of the problem and simply
after these strengths are established, other business responsibili- fi x it. After all, your business might just move on to bigger and
ties should be outsourced or eliminated. better growth with a little help from outsourcing partners.
Determine Your Objectives When Outsourcing
Once business owners decide which tasks to outsource, they must
consider their objectives. Many simply want to save money. “The Doesn’t Make Sense
cost savings are real,” says Maurice F. Greaver II, author of Strategic
1 Avoid outsourcing if you must give away proprietary infor-
08
Outsourcing. “But I would argue that outsourcing is worthwhile mation that may be leaked, says Charlie D’Agostino, director
WINTER
even if it costs 10% more, because you can get a wonderful return of Louisiana State University’s business and technology center.
on your investment by paying a little bit more for a higher quality
16 product or service.”
Hillary Feder, president of Hillary’s Gifts, outsources various
2 D’Agostino also recommends that business owners review
outsourcing operations regularly and quit the partnership
if the company can complete the task more efficiently in-house.
BUSINESS VISION
functions so she can provide a wider array of products in a cost-
3
effective manner. Her company designs and delivers customized According to small business consultant Andy Birol, never
gifts and gift baskets with the help of 20 outsourcing partners. outsource your “best and highest use”—the unique aspect
“Our outsourcing model allows us to buy services for what we need, of your business that customers value most.
BUSINESS SPOTLIGHT
Beautiful Memories
We R Memory Keepers makes a splash in the
scrapbooking industry with innovative and creative products
“
The scrapbook market has been a
good industry for us…but our growth has also
come from our products. We build great
designs and great products.
”
F ourth-generation bookbinder Andrew Hiller
found his calling after reinventing the family
business with a modern twist. Some 90
years ago, Hiller’s great-grandfather began
the Provo Book-Bindery in Utah, which
made one of the fi rst albums designed specifically to preserve
photos and other memories. And in 2001, the enterprising Hiller
began his own memory-keeping business by tapping into a popular
hobby: scrapbooking.
After getting a finance degree and interning at another scrap-
booking company, Hiller started We R Memory Keepers, located
Of the company’s many offerings, its innovative Crop-A-Dile tool
has scrapbooking fans buzzing most. The Crop-A-Dile easily punches
holes through materials such as paper, leather and tin. At the same
time, it reinforces the holes with eyelets, which allow design-minded
crafters to thread ribbons and other trimmings through the pages.
Soon after We R Memory Keepers opened its doors, the com-
pany needed more space. That’s when KeyBank stepped in. “They
went through a huge growth spurt, and they’re continuing to
grow,” says Brian Van Camp, the company’s Relationship Man-
ager at Key. “We got them into a bigger building and financed that
building so they could expand their operations.”
in Salt Lake City. “When I graduated, I put the two experiences We R Memory Keepers also needed a larger line of credit, which
together and just started making products,” says Hiller, who is KeyBank provided, to start manufacturing products overseas and
now 31 years old. ship them back to the U.S. According to Hiller, Van Camp not
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In addition to designing and manufacturing albums, We only helped the business obtain fi nancing but also took a personal
R Memory Keepers sells beautiful papers, page protectors and interest in its success. “I felt like he cared,” Hiller explains. “And
08
embellishments such as rub-on metallic lettering and colorful Key felt like a local bank.”
ribbons to coordinate with the papers. Stroll through the scrap- Hiller attributes most of the company’s success to innovative 17
book aisle of any specialty craft store and you’ll likely fi nd the designs and energetic managers. As he looks to the future, he
BUSINESS VISION
company’s leather albums, imported from Italy, or its handmade expects to continue building on an already significant growth
linen albums in a rainbow of colors. “Our growth has been based curve. “The scrapbook market has been a good industry for us, but
around product—we build great designs and great products,” I don’t think it’s just the market,” he says. “I think it’s also because
Hiller notes. of our products and our people.”
PHOTOGRAPH BY BEARD & HOWELL/DIGITAL VISION/GETTY IMAGES