For a variety of valid reasons, many SCORE clients make the decision to form a Limited Liability Company (LLC) for their new business. This company form offers the limited personal liability protection of a standard C or S corporation with the tax advantages of an S corporation without the excess costs and reporting burdens imposed by a C or S corporation. Mainly, these LLCs are sole owner companies.
Often, however, clients want to form an LLC with one or more associate(s). In many cases, the associate is a friend or a close relative such as a spouse. In all cases when clients want to form a multiple member LLC, SCORE counselors urge them strongly to enter in advance into a written Membership Agreement reviewed by an attorney competent in such matters. It should be noted that a Membership Agreement is a different document than an LLC Operating Agreement which is a required legal document by both the State of the LLC’s formation and the IRS. Although, the terms of a Membership Agreement could be incorporated into the Operating Agreement, it is preferable that it be a standalone agreement.
The purpose of the Membership Agreement is to be explicit as to the purpose of the business, the capital contribution and ownership percentage of each member and the allocation of management responsibilities: contracting, hiring and firing, purchasing, signing checks, entering into agreements, and other matters of mutual interest. The agreement can designate one or more of the members for each function and can also designate that, for some transactions more than one member’s agreement is required. Also, the Agreement details the dissolution of the business and the exit strategy from the LLC for the members in the event, for whatever reason one of them or their heirs/assigns wants to opt out. Clients are sometimes reluctant to enter into a Membership Agreement with a close friend or relative under the mistaken theory that it might be an insult, is culturally taboo or the members are very close and such an agreement is unnecessary. These are not valid reasons and there should always be a Membership Agreement irrespective of the personal or familial relationship between/among the members.
Contributors to this Ask SCORE column were Larry Pollack and Bill Litchman
Richard Strug
Greater Princeton Area SCORE (Chapter 631)
Serving Mercer and Middlesex Counties
Tuesday, April 28, 2009
Tuesday, April 21, 2009
How do I start a home-based Internet business?
Home-Based Internet Businesses Still Require “Old-Fashioned” Business Fundamentals. Our chapter’s resident expert on home-based Internet businesses, Sasha Mason, shares her thoughts and suggestions with you concerning this subject.
The fundamentals of home-based internet business are no different from any other business. It requires due diligence, planning, and endless hours. You are wasting your time and money if you are hoping to create a website and then sit back while the customers click away.
As with any other business model, the starting point for you home-based Internet business must be a good business idea followed by due diligence to ensure its viability. Are there other websites doing what you want to do? If so, is there room for another one? How big is your market? Assuming you pass these hurdles, you should register a domain name. This is inexpensive, easy to do, and will ensure that no one else takes your chosen domain name.
Next, draft a business plan. Even a relatively simple business that requires no financing will benefit from a well thought-out plan. Try to use reasonable projections -- one common mistake with internet businesses is underestimating your costs as well as the volume of sales needed to turn a profit. Also think carefully about your marketing plan – do not expect to rely solely on internet search engines. How will you advertise and drive traffic to your site?
Finally, hire a web designer, but remember you get what you pay for. There are many “web designers” for whom this is a side job. It is worth paying more to hire a professional with whom you can have an ongoing relationship. You will also need to look for a webhosting plan. There are plenty of inexpensive hosting sites. It is important, however, to ensure that your host can increase your bandwith as your site grows.
Good luck and remember that you can contact SCORE for help along the way.
Richard Strug
Greater Princeton Area SCORE (Chapter 631)
Serving Mercer and Middlesex Counties
The fundamentals of home-based internet business are no different from any other business. It requires due diligence, planning, and endless hours. You are wasting your time and money if you are hoping to create a website and then sit back while the customers click away.
As with any other business model, the starting point for you home-based Internet business must be a good business idea followed by due diligence to ensure its viability. Are there other websites doing what you want to do? If so, is there room for another one? How big is your market? Assuming you pass these hurdles, you should register a domain name. This is inexpensive, easy to do, and will ensure that no one else takes your chosen domain name.
Next, draft a business plan. Even a relatively simple business that requires no financing will benefit from a well thought-out plan. Try to use reasonable projections -- one common mistake with internet businesses is underestimating your costs as well as the volume of sales needed to turn a profit. Also think carefully about your marketing plan – do not expect to rely solely on internet search engines. How will you advertise and drive traffic to your site?
Finally, hire a web designer, but remember you get what you pay for. There are many “web designers” for whom this is a side job. It is worth paying more to hire a professional with whom you can have an ongoing relationship. You will also need to look for a webhosting plan. There are plenty of inexpensive hosting sites. It is important, however, to ensure that your host can increase your bandwith as your site grows.
Good luck and remember that you can contact SCORE for help along the way.
Richard Strug
Greater Princeton Area SCORE (Chapter 631)
Serving Mercer and Middlesex Counties
Tuesday, April 7, 2009
Do I need a license for my business?
There are many types of licenses, both state and local as well as professional. Depending on what you do and where you plan to operate, your business may be required to have various state and/or municipal licenses, certificates or permits.
Regardless of the legal structure of your business, you should contact the Clerks of both the municipality and county in which the business is located to determine if there are any permits required for your business and to determine if there are any local regulations that apply to your business.
Occupations and business activities often require some form of registration, license, or certification by the State of New Jersey. The New Jersey License and Certification Guide, prepared by the Department of Business Advocate& Information in the New Jersey Commerce, Economic Growth and Tourism Commission, contains a listing of these requirements with the appropriate agency contact. A copy of the guide can be found on line at: http://www.state.nj.us/njbusiness/licenses. The Hotline number is (609) 777-2642 or toll free 800-533-0186.
If you are a new or existing business owner and need assistance with the regulatory and permitting process, or need additional information or assistance with licensing, registration, certification requirements, or compliance issues, you should contact the NJ Commerce Call Center at 1-86NJFIRST9. Businesses will be connected to professional call center agents who will quickly direct callers to the appropriate Commerce office or other state agency. Call center agents provide businesses with information concerning any business or tourism related issue.
Building Codes, Permits and Zoning – It is important to consider zoning regulations when choosing a site for your business. You may not be permitted to conduct business out of your home or engage in industrial activity in a retail district. Contact the business license office in the city or town in which the business is located.
Your SCORE counselor is ready to assist you, as well. Please call 609-393-0505 for our free counseling service.
Richard Strug
Greater Princeton Area SCORE (Chapter 631)
Serving Mercer and Middlesex Counties
Regardless of the legal structure of your business, you should contact the Clerks of both the municipality and county in which the business is located to determine if there are any permits required for your business and to determine if there are any local regulations that apply to your business.
Occupations and business activities often require some form of registration, license, or certification by the State of New Jersey. The New Jersey License and Certification Guide, prepared by the Department of Business Advocate& Information in the New Jersey Commerce, Economic Growth and Tourism Commission, contains a listing of these requirements with the appropriate agency contact. A copy of the guide can be found on line at: http://www.state.nj.us/njbusiness/licenses. The Hotline number is (609) 777-2642 or toll free 800-533-0186.
If you are a new or existing business owner and need assistance with the regulatory and permitting process, or need additional information or assistance with licensing, registration, certification requirements, or compliance issues, you should contact the NJ Commerce Call Center at 1-86NJFIRST9. Businesses will be connected to professional call center agents who will quickly direct callers to the appropriate Commerce office or other state agency. Call center agents provide businesses with information concerning any business or tourism related issue.
Building Codes, Permits and Zoning – It is important to consider zoning regulations when choosing a site for your business. You may not be permitted to conduct business out of your home or engage in industrial activity in a retail district. Contact the business license office in the city or town in which the business is located.
Your SCORE counselor is ready to assist you, as well. Please call 609-393-0505 for our free counseling service.
Richard Strug
Greater Princeton Area SCORE (Chapter 631)
Serving Mercer and Middlesex Counties
Saturday, April 4, 2009
Should I consider email marketing?
SCORE counselor and resident advertising and marketing guru, Alan Yarnoff shares his thoughts on email marketing and the impact it can have on your business.
In today’s difficult environment it is essential to maximize you’re your marketing effort in the most efficient manor possible. One excellent tactic to achieve this goal is the use of a strong email marketing program.
Email marketing in its broadest sense covers every email you send to acquire new customers or persuade existing customers to buy again. In addition, it will serve to encourage customer loyalty and enhance the customer relationship. It gives you the opportunity to continue a positive dialog with your customer base, and to reinforce your relationship with your clients.
Notably, email marketing is a relatively low cost way to reach your target audience compared to traditional approaches like direct mail, newspapers, and radio and television. It allows you to target your message to your specific market segment while delivering valuable content material to the recipient. And, most importantly, it usually delelivers a high ROI (Return on Investment).
It’s a fact email marketing works. Why, because the national use of emails is growing. Statistics confirm that 91% of Internet users read and send emails every day. Secondly, the important senior market of baby boomers with its expendable income is joining in at a very high rate. In total, over 147million people use email every day.
Once you make the decision to use email marketing you need a plan. First you must decide what type to send, to whom, and when. You need to build an email list of permission based recipients; you most craft your message so it will be read, and you must plan on reviewing results and adjust when necessary. Do not make the same mistake twice.
One last but very major point is that you most receive permission before sending commercial emails. Email marketing only works if they are sent to permission based participants, other wise they will end up in the spam file.
Consider the following reasons why email marketing can help your business:
§ The low cost per order vs. any other promotional tactic.
§ Best way to drive people to your web site.
§ Email offers and promotions generate action.
§ Greater sales.
§ More downloads.
§ Significant number of inquiries and registrations.
§ High ROI (Return on Investment.
Richard Strug
Greater Princeton Area SCORE (Chapter 631)
Serving Mercer and Middlesex Counties
In today’s difficult environment it is essential to maximize you’re your marketing effort in the most efficient manor possible. One excellent tactic to achieve this goal is the use of a strong email marketing program.
Email marketing in its broadest sense covers every email you send to acquire new customers or persuade existing customers to buy again. In addition, it will serve to encourage customer loyalty and enhance the customer relationship. It gives you the opportunity to continue a positive dialog with your customer base, and to reinforce your relationship with your clients.
Notably, email marketing is a relatively low cost way to reach your target audience compared to traditional approaches like direct mail, newspapers, and radio and television. It allows you to target your message to your specific market segment while delivering valuable content material to the recipient. And, most importantly, it usually delelivers a high ROI (Return on Investment).
It’s a fact email marketing works. Why, because the national use of emails is growing. Statistics confirm that 91% of Internet users read and send emails every day. Secondly, the important senior market of baby boomers with its expendable income is joining in at a very high rate. In total, over 147million people use email every day.
Once you make the decision to use email marketing you need a plan. First you must decide what type to send, to whom, and when. You need to build an email list of permission based recipients; you most craft your message so it will be read, and you must plan on reviewing results and adjust when necessary. Do not make the same mistake twice.
One last but very major point is that you most receive permission before sending commercial emails. Email marketing only works if they are sent to permission based participants, other wise they will end up in the spam file.
Consider the following reasons why email marketing can help your business:
§ The low cost per order vs. any other promotional tactic.
§ Best way to drive people to your web site.
§ Email offers and promotions generate action.
§ Greater sales.
§ More downloads.
§ Significant number of inquiries and registrations.
§ High ROI (Return on Investment.
Richard Strug
Greater Princeton Area SCORE (Chapter 631)
Serving Mercer and Middlesex Counties
Wednesday, March 25, 2009
What are some of the key considerations in managing inventory?
Abraham Cohen, SCORE counselor, shares with us his thoughts on managing your inventory. There is a saying “inventory can make you or break you.” If it is too high, it ties up working capital and cash flow; too low, it may cost you sales. The right balance is easier said than done. Forecasting sales, market conditions, and deliveries may require a crystal ball. Inventory control is not a perfect science. However, the following principles, when applied, will get you close to optimum levels.
- Frequent Inventory Analysis: Use a computer program that matches your needs. Create your own program, buy a ready-made one, or hire the services of a programmer. If you are using QuickBooks for your accounting needs, they offer an inventory control add-on.
- Purchasing - Basic Factors: Months on hand; sales/lost sales; frequency (quarterly, bi-monthly, monthly, weekly or daily); vendors’ lead (delivery) time; safety stock to cover the unforeseen.
- Inventory Turns: Reorders per year. Example: monthly sales for item X is 20 (annual 240) – ordering 40 (2 months worth) every 2 months gives 6 turns; (240/40=6) – average monthly stock would be 20 (240/12). More turns, the leaner the inventory. Order timing is of the essence as well as adjustments for seasonal products.
- Vendor Lead Time: Order date to delivery. A 30 day delivery works fine for the above example, annual 240 and 6 turns. Order 40 units 6 times a year when your inventory is down to 20. Depending on the location of your vendor, domestic deliveries usually arrive in 30 days or less. Imported items can take up to three months or longer depending on the country of origin, trade agreements, location of the port, and inspections at both the shipping and receiving ports. Arranging for ‘Just in time’ delivery would be nice but many times difficult to forecast.
- Safety Stock: This factor is important especially when deliveries are unreliable. A 10 to 20% extra inventory cushion comes in handy, more so when sales are higher than forecasted. Lost sales and backorders hurt business and drive customers to your competitor. Incorporate the 10 to 20% into the purchasing formula.
- Computer Program Data: Above are basics to formulate a purchasing program. They are not universal. Different businesses require different data for their computer systems. The system will work only as well as the data entered: “Garbage in – Garbage Out.”
No computer program can claim perfection. Checking the numbers before placing the order will prevent nasty surprises. An experienced purchasing agent must know the items and have a working knowledge of your business. And remember, inventory = $$$$$$ already spent.
Richard Strug
Greater Princeton Area SCORE (Chapter 631)
Serving Mercer and Middlesex Counties
- Frequent Inventory Analysis: Use a computer program that matches your needs. Create your own program, buy a ready-made one, or hire the services of a programmer. If you are using QuickBooks for your accounting needs, they offer an inventory control add-on.
- Purchasing - Basic Factors: Months on hand; sales/lost sales; frequency (quarterly, bi-monthly, monthly, weekly or daily); vendors’ lead (delivery) time; safety stock to cover the unforeseen.
- Inventory Turns: Reorders per year. Example: monthly sales for item X is 20 (annual 240) – ordering 40 (2 months worth) every 2 months gives 6 turns; (240/40=6) – average monthly stock would be 20 (240/12). More turns, the leaner the inventory. Order timing is of the essence as well as adjustments for seasonal products.
- Vendor Lead Time: Order date to delivery. A 30 day delivery works fine for the above example, annual 240 and 6 turns. Order 40 units 6 times a year when your inventory is down to 20. Depending on the location of your vendor, domestic deliveries usually arrive in 30 days or less. Imported items can take up to three months or longer depending on the country of origin, trade agreements, location of the port, and inspections at both the shipping and receiving ports. Arranging for ‘Just in time’ delivery would be nice but many times difficult to forecast.
- Safety Stock: This factor is important especially when deliveries are unreliable. A 10 to 20% extra inventory cushion comes in handy, more so when sales are higher than forecasted. Lost sales and backorders hurt business and drive customers to your competitor. Incorporate the 10 to 20% into the purchasing formula.
- Computer Program Data: Above are basics to formulate a purchasing program. They are not universal. Different businesses require different data for their computer systems. The system will work only as well as the data entered: “Garbage in – Garbage Out.”
No computer program can claim perfection. Checking the numbers before placing the order will prevent nasty surprises. An experienced purchasing agent must know the items and have a working knowledge of your business. And remember, inventory = $$$$$$ already spent.
Richard Strug
Greater Princeton Area SCORE (Chapter 631)
Serving Mercer and Middlesex Counties
Tuesday, March 17, 2009
How do I keep my service customers?
Customer confidence is important to every successful small business, but particularly to those that offer services. Here, the customer’s satisfaction determines whether you cultivate loyalty or an unfavorable reputation through word-of-mouth.
The foundation of this confidence is quality. The typical customer knows little about the technical side of your business and therefore judges your business solely on results. For others, it’s the courtesy and integrity of you and your staff. Never assume things are satisfactory. Continually monitor your operations and competition to be sure you are staying on top of your customers’ needs.
For example, evaluate the price range for services offered by competitors, determine how and why they arrived at that price schedule, and make sure your prices are reasonable and reliable. Provide each customer with a comprehensive bill that breaks out specific charges.
Train your employees to be patient with all customer questions. Be sure there are clear policies in place to address service errors, complaints and discounts. Train your employees to handle such situations and to know at what point complaints should be directed to you. Not even a loyal customer appreciates getting the runaround.
In all customer dealings, honesty is the best policy. No one likes to hear that a service problem has not been solved or that the resolution will take longer than expected. Be as specific as possible, but leave room for unforeseen problems such as receiving the wrong part or an employee’s personal emergency. And if a delay is unavoidable, notify the customer right away.
If you would like to discuss this topic or business planning, business growth strategies or a specific business issue, contact us at 609-393-0505 or email us at info@scoreprinceton.org.
Richard Strug
Greater Princeton Area SCORE (Chapter 631)
Serving Mercer and Middlesex Counties
The foundation of this confidence is quality. The typical customer knows little about the technical side of your business and therefore judges your business solely on results. For others, it’s the courtesy and integrity of you and your staff. Never assume things are satisfactory. Continually monitor your operations and competition to be sure you are staying on top of your customers’ needs.
For example, evaluate the price range for services offered by competitors, determine how and why they arrived at that price schedule, and make sure your prices are reasonable and reliable. Provide each customer with a comprehensive bill that breaks out specific charges.
Train your employees to be patient with all customer questions. Be sure there are clear policies in place to address service errors, complaints and discounts. Train your employees to handle such situations and to know at what point complaints should be directed to you. Not even a loyal customer appreciates getting the runaround.
In all customer dealings, honesty is the best policy. No one likes to hear that a service problem has not been solved or that the resolution will take longer than expected. Be as specific as possible, but leave room for unforeseen problems such as receiving the wrong part or an employee’s personal emergency. And if a delay is unavoidable, notify the customer right away.
If you would like to discuss this topic or business planning, business growth strategies or a specific business issue, contact us at 609-393-0505 or email us at info@scoreprinceton.org.
Richard Strug
Greater Princeton Area SCORE (Chapter 631)
Serving Mercer and Middlesex Counties
Tuesday, March 3, 2009
What's the value of a business mentor?
Often the smartest people are the ones who know they don’t know it all. Like it or not, a business of your own exposes you to duties, situations, problems and opportunities you may never before have faced. Is it time for you to get a mentor?
A mentor is an experienced business adviser who is willing to share information and insights on a regular basis. If you worked in a corporate environment before going out on your own, you’re probably familiar with the concept of a senior manager in the organization mentoring a younger one. Some companies have even formalized their mentoring program. In your own business, however, of necessity your mentor will come from outside.
If you are seeking a mentor, it makes sense to start by looking for experienced business professionals in the same business or industry as your own company. Ideally the one you want will already know something about your work and management style. Over your entrepreneurial career, you may even have a succession of mentors.
What does a mentor contribute to your growth as a business owner? First of all, he or she helps speed up your learning in vital areas of your business. This individual is not afraid to share personal experiences with you as well as expertise. But there are other advantages. A mentor
helps you avoid isolation, by becoming a “trusted other” in which to confide your uncertainties as well as your breakthroughs. A good mentor lends perspective, reminding you to “keep your eye on the doughnut and not the hole”; supplies the candid, honest feedback you may not be getting from your employees; and provides moral support for the tough decisions you have to make in your business.
Not so very far down the road, you will be ready to mentor individuals who are where you were only a year or two ago. You may be pleasantly surprised to see how this accelerates your own learning and growth as an entrepreneur. You then become a contributor to the business community in the same way your mentor was to you.
In short, mentoring is a relationship that will pay dividends for both you and the individual who mentors you. Finding the right mentor could be one of the most important ways you help your business to succeed.
Richard Strug
Greater Princeton Area SCORE (Chapter 631)
Serving Mercer and Middlesex Counties
A mentor is an experienced business adviser who is willing to share information and insights on a regular basis. If you worked in a corporate environment before going out on your own, you’re probably familiar with the concept of a senior manager in the organization mentoring a younger one. Some companies have even formalized their mentoring program. In your own business, however, of necessity your mentor will come from outside.
If you are seeking a mentor, it makes sense to start by looking for experienced business professionals in the same business or industry as your own company. Ideally the one you want will already know something about your work and management style. Over your entrepreneurial career, you may even have a succession of mentors.
What does a mentor contribute to your growth as a business owner? First of all, he or she helps speed up your learning in vital areas of your business. This individual is not afraid to share personal experiences with you as well as expertise. But there are other advantages. A mentor
helps you avoid isolation, by becoming a “trusted other” in which to confide your uncertainties as well as your breakthroughs. A good mentor lends perspective, reminding you to “keep your eye on the doughnut and not the hole”; supplies the candid, honest feedback you may not be getting from your employees; and provides moral support for the tough decisions you have to make in your business.
Not so very far down the road, you will be ready to mentor individuals who are where you were only a year or two ago. You may be pleasantly surprised to see how this accelerates your own learning and growth as an entrepreneur. You then become a contributor to the business community in the same way your mentor was to you.
In short, mentoring is a relationship that will pay dividends for both you and the individual who mentors you. Finding the right mentor could be one of the most important ways you help your business to succeed.
Richard Strug
Greater Princeton Area SCORE (Chapter 631)
Serving Mercer and Middlesex Counties
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