Business Information for Entrepreneurs by an Entrepreneur

Venture capital funding dropped 47% from 2008 to 2009, while total money invested dropped 38%, according to the year-end industry stats provided by the National Venture Capital Association and Thomson Reuters. The numbers are representative of the skittishness of venture capital funds over the last few years.

Comparing the Numbers

To put these numbers in perspective, the 2009 year end total venture capital funds raised was only $15.2 billion. That’s the lowest amount of venture capital fundraising since 2004, when the total was $19.1 billion. Keep in mind that venture capital reached a high of $36.1 billion in 2007.

In terms of total venture capital investment given to startup business, the total for 2009 was $17.6 billion, down from a six-year high of $30.5 billion in 2007.

Analyzing the Facts

What do these numbers tell us? The president of the NVCA, Mark Heesen, said in the press release, “Many venture firms stayed out of the fundraising market in 2009, a dynamic that is clearly reflected in the lower volumes.” Heesen goes on to say that 2010 will be a defining period as “…firms will not be afforded the luxury of continuing to wait for market conditions to improve in 2010.”

Looking Forward in Venture Capital

The amount of venture capital activity in both fundraising and investing in 2010 will define how venture capital will conduct business in the next decade. Heesen states,” all signs point to a leaner, more capital efficient asset class comprised of firms with proven track records of delivering value to limited partners. Not all firms will make that cut, but the ones that do will be very well positioned to invest.”

What we do see projected in 2010 is that venture capital firms are cautiously optimistic, according to the Annual Predictions Survey conducted by the NVCA. 63% of all respondents predict that total venture capital dollars invested will remain the same or increase in 2010. 44% of those say they expect to see an increase to $21 to $25 billion in financing.

However, the most respondents, 90%, agree that the number of venture capital firms will decrease over the next five years. 72% state that VC firms will decrease between one and thirty percent.

The bottom line is that 2009 was the lowest for VC funding and investment in five years, and 2010 will be a litmus test for the VC industry for years to come. You can find more stats and interesting data at the NVCA website.

As we begin to approach tax season, it’s time to collect all our tax-related documentation, including those pertaining to your vehicle. After all, your auto-related expenses can add up to be big deductions. Here’s a look at how you can deduct your automobile usage:

Employee Mileage Reimbursement

As an employee, the IRS does not allow you to deduct mileage for your commute to and from work. However, if you use your own automobile for business purposes, such as attending business meetings, you can deduct mileage as set by the IRS. The current deduction amount is $0.55 per mile for 2009.

However, there is a catch to personal deduction of employee mileage if your employer reimburses you for your mileage expenses. If your employer reimburses you less than $0.55 per mile, you may deduct the difference up to that amount. If your employer reimburses your mileage above the $0.55 per mile, good news! You may pocket the overage without having to report it on your personal taxes.

Standard Mileage for Business Use

If you, as a small business owner, use your personal vehicle for business use, you can also deduct the standard mileage rate for all business purposes. Whether you drive to client meetings, go to the bank to make deposits, or visit the office store for supplies, each mile can be deducted.

In addition, you can add parking fees (not tickets), fares, and tolls to the total deduction amount.

However, you may only use the mileage deduction if you use less than five vehicles during the year, and if you have not used a depreciation deduction (explained below) on the same vehicle in a previous year.

Actual-Cost Deduction Method

You may find that the Actual-Cost method can save you even more on your taxes. Using Actual-Cost, you can deduct depreciation of the vehicle and other actual expenses, such as oil changes and other maintenance costs, fuel, insurance, registration, and license fees. You must keep detailed records of your trips, including odometer readings and all receipts. Your actual business deduction is the percentage of use your vehicle for business purposes during the year.

If you use a “heavy” vehicle with a 6,000 gross-vehicle-weight rating (GVWR) for more than 50% of your business use, you can save even more. Larger vehicles are allowed a larger depreciation deduction as follows:

Year 1: 20.00%
Year 2: 32.00%
Year 3: 19.20%
Year 4: 11.52%
Year 5: 11.52%

Also, with the Section 179 Deduction allowance passed with the American Recovery and Reinvestment Act of 2009, you can deduct up to the full depreciation amount in the same year if the vehicle was placed in use as of 2008 or later.

Vehicle deductions can mean big tax savings for your personal taxes. Be sure you take the maximum deduction allowed by the IRS.

Do you think your small business could turn into a Fortune 500 corporation? Just because your business is currently local doesn’t mean you can’t think globally and expand your business horizons. A good example is a success story about Fairytale Brownies, which was started in 1992.

Fairytale Brownies was formed by long-time schoolmates, David Kravetz and Eileen Spitalny in 1992. They began baking his mother’s 50-year old brownie recipes using the back of a friend’s catering kitchen. Their brownies were a hit with the local community, and they decided to make it a full-time venture and gave up lucrative jobs in the corporate world at Proctor & Gamble and television.

Creative Promotion

Fairytale Brownies found a 1,000 square foot facility in Scottsdale, Arizona, where they could make their delicious delicacies, and they soon had to double their space a year later due to their popularity.

To help get the word out about their product, they gave samples and sold their products at street fairs and farmer’s markets. Still, they continue to promote Fairytale Brownies by partnering with local and national non-profits, such as the national playground developer, KaBOOM.

Strategic (And Lucky) Domain

David and Eileen had the vision in the early 1990s to notice that the internet was becoming a great place to promote a business given the growing numbers of internet users. They bought the domain, brownies.com, and have not looked back since. Now about half of their business sales are via their internet site, and 35% of all revenue comes from internet sales.

Expansion

Fairytale Brownies sales volume steadily expanded year after year, finally reaching $1 million in sales in 1997. David and Eileen have used three separate small business loans backed by the SBA, culminating in the development of their 26,000 square foot baking facility in 2006, which now serves as both their main production facility and corporate headquarters. They employ about 30 regular year-round employees and an additional 50 during the busy holiday season. Each employee is empowered to make decisions that will help keep customers happy.

By 2007, Fairytale Brownies reached $10 million in gross sales.

Take an example from David and Eileen – they took a delicious family recipe and created a bonanza of a brownie empire with strategic promotions, partnerships, and marketing. Will your little venture be the next $10 million small business company?

Negotiate the highest price for your services.  Overcome price resistance by your prospects and customers.

Here is a proven strategy to negotiate pricing in your favor when a customer asks for a lower price. This video includes sample dialogs you can use to show your customer why your prices are worth it.

Note: this video is streamed directly from YouTube. If it hangs or you have issues, try one of these other links:

• Negotating: BlipTV
• Negotating: Yahoo Video
• Negotiating: DailyMotion

Just because you’re a small business owner doesn’t mean you have to skimp on state-of-the art and high tech products that could benefit your business. From the looks of the exhibits from the recent 2010 Consumer Electronics Show (CES), your small business can enjoy new technology for a reasonable price. Here’s a brief look at a few new products from CES that might interest you:

Safe Backup with IoSafe Solo SSD

Backing up your electronic files and data is of major importance. But what would happen to your data if your external backup storage suffered damage from a major disaster?

The new IoSafe Solo SSD is a solid-state hard drive that you can use to safely backup your important data. According to IoSafe, it can withstand up to 5,000 lbs of pressure, temperatures up to 1550 degrees, and last 30 minutes submerged in 30 inches of water. Prices range from $499 to $1,250 for a 64 GB up to a 256GB size.

Take Your Wireless on the Road with the Sprint Sierra Wireless Overdrive

For just $100 and a 2-year service contract, you can take your internet anywhere. The new Sierra wireless router provides both WiMax and 3G signals for up to five devices simultaneously.

Easy Presentations from Your Blackberry with the Blackberry Presenter

Your sales staff no longer needs to lug a laptop to every presentation. Simply use the new Blackberry Presenter device attached to any Blackberry PDA and give your presentations anywhere. The device allows easy connection from a Blackberry to any projector or monitor so your presentations can be delivered easily from the palm of your hand without the setup of a laptop. This new device costs about $199.

Fast Presentations Anywhere with a New LG eXpo Projector.

Now you can literally give an elevator pitch and presentation from your phone. The new LG eXpo is an AT&T exclusive Windows Mobile smartphone that sells for $250 (with a 2-yr AT&T service contract), and it comes with an optional $179 projector.

Now you no longer need a laptop, monitor, or heavy projector. Just set up the mobile device and attachable projector on any flat surface to get an equivalent 66 inch diagonal display. Give a sales presentation, show financial spreadsheets, and even view pictures of the kids from the palm of your hand.

CES certainly debuted its fair share of 3D TVs and gaming advancements, but there are gems that can enhance the productivity of your small business as well.

The number of home-based businesses is on the rise. 2009 has seen a sharp increase in entrepreneurship, and 2010 looks to be an even bigger year for new entrepreneurs. Interestingly, the largest segment of these numbers is in the category of “lipstick entrepreneur.”

Who is the lipstick entrepreneur? No, it’s not those who sell fashion makeup from home. Rather, it is the term coined for the growing number of independent businesswomen.

Booming Numbers of Female-Owned Companies

The numbers of women entrepreneurs have risen sharply in the last few years. According to a report by The Future Laboratory, a leading European trend forecasting firm, there has been significant growth in women-owned businesses over the last 12 month period. More than 1 million women are solo entrepreneurs in the UK, and the report expects that trend to double by the next decade.

In the US, the new book by Michael J. Silverstein and Kate Sayre, Women Want More, states that the number of women-owned businesses are expanding at twice the rate of those started by male entrepreneurs. These numbers point to the trend that not only are women starting businesses to help meet expenses, but they are seeing an available place in the general market that have been left by male entrepreneurs.

Raising Kids and Making Money

The old paradigm of women staying home simply to take care of the children is long gone. Rather than just give up working completely when they decide to have kids, women have started forming home businesses to continue working for themselves while they remain home with the young ones. Whether it is part time or full time, women entrepreneurs are finding that they can have a job and raise kids too.

Whether it is to break the proverbial glass ceiling, or just prove that they can make a difference at home, women-owned businesses are definitely the trend setter in home-based opportunities. Look for these numbers to rise in the next few years, and for the lipstick entrepreneurs to become a monumental part of business in America during the next decade.

Cold Stone Creamery has grown to become a popular franchise, but one that has seen its share of ups and downs. With a top ranking of #14 in 2007, it dropped to #90 in 2008, but has risen back to #35 in 2010, according to Entrepreneur Magazine’s annual reports.

Interestingly, what captures our attention is the drop in the number of Cold Stone Creamery franchises. In 2008, Cold Stone had a peak of 1,394 stores, but in one year, saw a drop down to 1,221 in 2009. From the Cold Stone Creamery in Santa Ana, California to the location in Fenton, Michigan, these delicious stores have shuttered their doors. Why has this popular brand of ice cream dwindled?

The Ravages of the Economy

By and large, the most common factor is the economy. Cold Stone Creamery offers delicious frozen products and “the ultimate ice cream experience,” but it does so at a price. For over 20 years, Cold Stone has offered creative and unique ice cream products using only the highest quality ingredients and a “signature process.” What customers enjoy is a great-tasting product that is priced at expendable income levels.

With the economy slump beginning in 2007, many people have simply stopped paying for luxury items such as the Cold Stone process ice cream. Ice cream can be bought much cheaper in the grocery store or at other locations.

High Overhead

In addition, many of the new Cold Stone locations opened at the height of the real estate boom with overinflated rents. When the market imploded and rents dropped to more reasonable levels, many new franchise owners were stuck in a long-term lease that they simply could not afford.

Heated Competition

Another reason Cold Stone numbers are dwindling could also be increased competition. Dairy Queen has been a long-term staple that offers reasonable priced ice cream products similar to the Cold Stone process. Why would consumers pay more for Cold Stone when they can go down the street and to Dairy Queen for a cheaper and similar product, or find a cheaper and healthier frozen yogurt alternative such as Pinkberry?

It is true that consumers still like their ice cream, and many consumers are loyal to their brands, especially when it comes to Cold Stone. However, Cold Stone will need to see better management of locations and competition to see them become a favored franchise once again.

From tutoring centers to fast food outlets, the types of available franchises can be dizzying. There are hundreds, even thousands, of potential franchise opportunities, each with their own strengths and weaknesses.

Which are the franchises that continue to lead the pack? According to Entrepreneur Magazine, who has just completed their annual ranking of the top 500 franchises, here is a look at the top five franchises that you might see in 2010.

Subway

Subway has been in existence since 1965, and it has offered franchise opportunities since 1974. There are currently 22,525 franchise locations in America and almost 9,000 in foreign markets worldwide. Costs for starting a Subway franchise can be anywhere between $85,000 and $260,000, and the franchising fee can be financed. Subway has been the top-ranked franchise for the last five years.

McDonald’s

Since 1955, McDonald’s has offered successful franchise opportunities with a streamlined business model and process, as well as obvious worldwide branding. In 2009, there were over 12,000 American franchises and over 13,000 franchises around the world.

While McDonald’s is still seeking additional franchises, expect to have plenty of capital available if you wish to start one. Typical startup costs are about $1 to $2 million for a single store with no in-house financing available.

7-Eleven

7-Eleven Inc was founded in 1927 in Dallas, Texas and began franchising in 1964. Today 7-Eleven has over 30,000 stores worldwide, with 6,378 in the U.S in 2009. Franchisers must have a net worth of at least $127,000, and depending on whether the store is rented or newly constructed, startup costs can range from about $40,000 to $775,000.

Hampton Inn & Suites

Hampton Inns started in Tennessee in 1984 and found a niche with their affordable 2-room suites. Franchises in the U.S. total 1,595 in 2009. Although there are no net-worth qualifications, an entrepreneur must still have industry or general business experience, as well as $3.7 to $13 million for startup costs.

Supercuts

Supercuts have offered quality, streamlined hair salon services since 1975 and franchise opportunities since 1979. Its popularity continues to grow with over 1,000 units in the U.S. in 2009. Although this appears to be a seemingly simply retail franchise, expect to have $300,000 in net worth with high liquidity, as well as an ability to invest in startup costs of $111,000 to $240,000.

The one common trait of the top five franchises ranked by Entrepreneur is that they have all stood the test of time, generating revenues for decades. While their proven track record may translate into higher franchise fees, these top five franchises are also more likely to prove profitable for you in the long-term.

By the end of 2009, the media and government reports alike announced that key economic indicators looked good for a recession recovery. However, although some indicators were positive, not all demonstrated good news – especially in California where small business bankruptcies increased by about 81% as of the12 months ending September 30, 2009. Across America, the statistics were still disheartening, with Equifax reporting that national bankruptcies were up 44%.

The Gloomy Situation

Many small businesses in California were simply trying to wait out the economic crunch, hoping for a light at the end of the tunnel.

But the light never came.

Small business lending and lines of credit simply disappeared and dried up with banks fearing additional defaults, and consumers stopped spending except only for necessary items. Many of those small business owners tried to wade through the economic crunch by obtaining loans and lines of credit where they could find them. However, small business lending became tough with stricter personal guarantee or co-signer requirements.

Unfortunately, as of the end of Q3 2009, about 19,000 small businesses have filed for bankruptcy. This number is strictly based upon small business bankruptcies alone, and it does not account for the numerous individuals who filed for personal bankruptcy because their sole proprietorship business failed.

2,229 small businesses filed for bankruptcy protection in September, 2009, which was up from 1,503 in September, 2008. Many more small businesses are not included in these figures because bankruptcy attorneys consult their clients to file personal bankruptcies, which are easier than small businesses bankruptcies.

The Sunnier Future Ahead

Although 2009 was tough on small businesses, those who have managed to survive will find it easier to obtain low-interest loans with the 2009 economic stimulus plan in effect. More money will be guaranteed by the government for small business loans. In addition, the Obama administration has asked for the elimination of capital gains taxes on new investments in small business stock, as well as tax incentives for small businesses to hire new employees.

This news is encouraging, especially since California is experiencing the largest failure rate of small businesses. Hopefully, with the money coming from tax incentives and loan guarantees, California will soon see a reduction in small business failures and once again be on the road to economic recovery.

Nature or nurture? This eternal debate continues to shape behavioral sciences regarding how people develop their personalities. Interestingly, the question extends into the realm of entrepreneurship: are people simply pre-programmed to become business owners?

What the Entrepreneurship Statistics Reveal?

Let’s first take a look at the facts. According to a study performed by the Ewing Marion Kauffman Foundation, a leading non-profit entrepreneurial devoted to promoting entrepreneurship, almost half of all small business owners came from a family where a parent also started a small business. About 15% of entrepreneurs had a sibling who started a business before them.

With this information, one can conclude that a person is more likely to become an entrepreneur and start a small business if they had a family member who did the same.

Business Ownership: Nature or Nurture?

However, is the data conclusive to whether a person is programmed in their DNA to become an entrepreneur? Not really. Most likely people have a tendency to follow in a parent’s footsteps because they are trained to do so. A person who has a parent or sibling model of an entrepreneur has a much better chance to learn the ropes of starting and operating a small business, as well as the benefit of encouragement, coaching, and emotional and financial support.

However, though training and modeling support the ‘nurture’ theory, there are studies that show how a person can be predisposed to possessing entrepreneur traits. The Journal for Business Venturing is a scholarly publication that conducts studies that deepen the understanding of entrepreneurial phenomenon. An article published in 2008 concluded that inherited traits such as extroversion may, indeed, play a part in entrepreneurial endeavors. The authors concluded that there were high probabilities of inherited traits contributing to the propensity for entrepreneurial endeavors. In addition, these traits had little influence from the family upbringing or environment.

In answering the question regarding whether entrepreneurs are born, it is not entirely conclusive. However, it is obvious that a people with certain traits can become entrepreneurs more easily than people without those traits. In addition, families with supportive and modeling entrepreneurs can help develop other entrepreneurs within the family – which may be the catalyst behind the saying, “keeping it in the family.”