Tuesday, November 24, 2009

Should my business idea be patented or protected in some way?

Protecting Your Intellectual Properties is a Smart Move.

“TM,” “SM,” “PAT PEND,” “©,” “®.” These small symbols and abbreviations carry a lot of legal weight when it comes to safeguarding a company’s proprietary names, designs, products, and services. As an entrepreneur, you should consider making sure the valuable intellectual properties of your small business are protected as well. But which one(s) do you need?

Trademarks are not the same as patents and copyrights, even though the differences are not widely understood. While there are similarities, they serve different purposes.

According to the U.S. Patent and Trademark Office (USPTO), a trademark is a word, name, symbol or device used in business to indicate a source of the goods, i.e. your business, and to distinguish those goods from those sold by another business. A service mark is the same as a trademark, except that it identifies and distinguishes the source of a service rather than a product.

A patent for an invention grants a specific legal property right to the inventor—“the right to exclude others from making, using, offering for sale or selling” the same invention.

A copyright is harder to define. It is mainly a protection for authors of original works, including literary, dramatic, musical, artistic, and other intellectual works, both published and unpublished.

The Internet has transformed the once mysterious process of applying for a trademark into something accessible to anyone willing to spend some time to understand the intricacies and get it right. But while no business skills or special legal knowledge are required to apply, the field is filled with potential pitfalls and wrong turns that could sabotage your trademark filing if you don’t know the intricacies of creating trademarks that can stand up to legal challenges later on.

For example, the application requires that you identify goods or services under specific categories. But misunderstanding these categories and filing too broadly or too narrowly can ruin your trademark and cause problems later on. A qualified trademark attorney can help you avoid such problems.

The U.S. Patent and Trademark Office’s Web site at www.uspto.gov provides a wealth of information and resources about protecting your small business’ intellectual properties. You’ll find basic information about trademarks, patents, and copyrights; links to easy-to-follow “How To” guides; and search engines for researching existing trademarks and patents.

Richard Strug
Greater Princeton Area SCORE (Chapter 631)
Service Mercer and Middlesex Counties

Tuesday, November 17, 2009

How much should I charge for my product or service?

How much to charge is one of the first questions most small business owners ask. And, it's not an easy one to answer. Setting a pricing strategy depends on many factors - the type of product or service you're offering, your own costs to provide it, your expected profit, your customers' location, the "going rate" for your industry, and many others.

Finding just the right balance between all of the factors involved is more art than science. Pricing too low can cut into your profits, while overpricing also can hurt your business.

A common misstep - especially in the early stages of a business - is pricing too low in order to attract customers. While special deals can work in some cases to start the ball rolling, going low is not always the best path. Low prices can draw customers interested only in price. They are the ones most likely to abandon you the moment they find something priced even lower elsewhere.

Selecting excessively low pricing levels to attract clients is even more dangerous for service businesses. You only have so many hours to sell. Your business can't make it up in volume like a retailer who still profits from lower prices if volume is high enough.

Pricing is partly psychological. You will want to set your levels according to the perception of your product or service "brand." If you want to be in the premium neighborhood, your pricing can be higher to match an upscale image. Pay attention to price points; they differ widely by product and industry.

Pricing is an ongoing process, so test your pricing periodically. You may need to adapt to changing conditions. Competitor prices, your own costs, customer perceptions, and your profit expectations can all change. Or, you may want to simply test different pricing levels to see what works best for your business.

Research the norms for your industry, including price ranges across the country if you sell nationwide. You may want to charge more or less, depending on your brand positioning.

Make sure ou use timely and accurate information to calculate your costs for labor, supplies, and direct and indirect overhead for every product or service you offer. "Guesstimates" are not good enough, and may cost you far more than the hour or two of research. Also take into account seasonal fluctiations that might cause short-term increases.

Richard Strug
Greater Princeton Area SCORE (Chapter 631)
Serving Mercer and Middlesex Counties.

Wednesday, November 11, 2009

What kind of life insurance do I need as a small business owner?

If you're a small business owner, chances are that you've caught yourself more than once dreaming about the future. You may picture yourself hobnobbing with industry leaders, cornering the market with an innovative product or service, or directing the work of hundreds of employees.

There's nothing wrong with this kind of musing - as long as you are willing to invest the time and energy to achieve these dreams. However, entreprenuers often fail to consider a less cheerful scenario: what happens to the business if you die suddenly? Would your business close? Would it be clear who controls the assets? Would your family's interests be protected?

The best way to avoid this troubling uncertainty is to have life insurance for your business - and it may not be optional. Before making a business loan, many banks require the business owner to have a life insurance policy. Typically, it's in the form of term life insurance that covers the cost of the loan in the event the borrower dies. The bank then is the beneficiary of the insurance policy.

Life insurance can provide for the successful liquidation of your financial interest in the business, thereby protecting your heirs. If your employees are scheduled to assume ownership following your death, the insurance policy can be designed to provide funds for the purchase of the business. In addition, the life insurance policy can be used to pay the federal estate taxes on your estate. It can also fund a buy-sell agreement between partners.

If the business is to be sold outright after your death, an insurance policy can provide working capital for the transition period. The availability of a ready source of cash will make the business much easire to sell. Assets are usually discounted during such a sale, so the availability of insurance funds will help your heirs.

A related type of insurance is "key person" (or "key man") insurance, which compensates your company for the loss of an employee who is vital to the business operation. The business would have funds to tide it over in case of any slowdown resulting from the loss, and provide funds to apply to the search for and compensation of the key person's successor. For businesses with multiple owners, each partner should have a life insurance policy to facilitate an automatic buyout of the deceased partner's interests.

You should consult with your family, your attorney, and your insurance agent when putting together a sound life insurance program. If you belong to a professional association, chances are that the association has an affinity program that offers affordable insurance.

Richard Strug
Greater Princeton Area SCORE (Chapter 631)
Serving Mercer and Middlesex Counties

Tuesday, November 3, 2009

Does outsourcing make sense for my business?

In a small business, unfortunately, you can't do everything for yourself and still expect to grow. If you're not in a position to hire employees to share the workload, chances are that you'll consider outsourcing.

Companies of all sizes can benefit from sending certain job functions outside rather than dealing with them in-house. Some of those tasks may be infrequent or require special equipment; others may fall into the category ofongoing maintenance, such as accounts payable and receivable, or janitorial services.

Regardless of the type of company you have - service, retail, or manufacturing - not every activity involved in operating your business requires your expertise. In fact, it makes sense to outsource any activity that another individual or company on the outside can do better than you. As the company owner, you then free up your own time and talent for the more profitable aspects of running your business.

Bookkeeping is an example of a job function for which a small business may not require a full-time employee. Unless you yourself have an accounting background, this is an activity that you may not enjoy and consequently put off. Even if you work on your own tax forms, you may not want to keep up with payroll requirements the way an outside payroll management firm does. Computer maintenance is another area where it may make sense to oursource, by buying a small amount of expertise and service that would take you or other employees a long time to master yourselves.

There are also good reasons not to outsource. One is the possibility that the IRS will not view your outsourcing partner as an independent contractor, but as an employee of your business. If that happens, you may find yourself paying that individual's Social Security taes and possibly other penalties....so make sure that you know and follow all the rules in this area.

In addition, the time may come when outsourcing a particular activity is no longer cost effective - because of increased business volume, for example, or a shift in the focus of the business that causes the outsourced functin to warrant full-time attention on site. Or, outsourcing might be the right idea, but you discover that your first choice of contractor is not the right choice. That's a situation that will cost you time (and perhaps other resources) to rectivy before it saves you time.

Time and money are your two most important resources. Outsourcing certain functions may save you both. If you have a clear focus and a handle on your day-to-day management, you'll know whether and when it makes sense for your company.

Richard Strug

Greater Princeton Area SCORE (Chapter 631)

Serving Mercer and Middlesex Counties