How to find an attorney for your business

Q: How do I find a capable attorney for my small business?

A: Finding the right attorney for your small business can be difficult.  Many lawyers are not skilled in representing a struggling new business. Lawyers who primarily deal with consumer matters such as divorce, personal injury or consumer bankruptcy may be less skillful in business matters.  So, how do you search for and select a capable attorney?

A good place to start your search is the website of the Houston Lawyer Referral Service, www.hlrs.org. HLRS is a non-profit community service and provides free referrals. Their attorneys provide an initial 30-minute office consultation for a reduced fee of $20.

The membership directory of your local Chamber of Commerce will have information on attorneys who are members of that chamber.

Accountants work with many attorneys and are often a good source for referrals as are business insurance brokers.  

SCORE has counselors with legal background used in providing business counseling, but, they cannot represent your company on legal matters.

How do you select among the candidates?  An established attorney should have a website that provides some history of the attorney, her experience, the nature of her practice, and a list of some typical clients.  If a group practice is identified, but no specific individual, call and ask which attorneys in the firm specialize in small business practice.

Once you have identified the two or three that seem to fit, call and schedule a 15 minute interview.  Explain your purpose is to select an attorney for your new business, and that you do not expect legal advice at the meeting. Many attorneys will not charge for an introductory session.

At the meeting, briefly describe your business.  Find out what types of businesses the attorney typically represents.  Discuss services you need immediately and evaluate their response.  Ask what services you may need that you have not considered.  Find out if they charge by the hour, by the project, or on retainer, and what their fees are.  Ask if they can work within your budget?

Try to assess if you will be able to rely on the attorney when your business success or failure is at stake.  Is she generally a “problem solver”?  You want someone who works hard to find solutions to business problems.  At the same time you want an attorney who explains risks and is ready to give you advice you need, even if it is not what you want to hear.

New Affordable Employee Health Insurance

Q: As a small business owner I have struggled to find health insurance benefits for my employees that we can afford. Do you have any suggestions?

A: Fortunately, the Texas Department of Insurance (TDI) has developed a new health insurance product called Healthy Texas to help small business owners who would like to provide health insurance to their employees but have not been able to offer it.

For the employer and the employee, Healthy Texas operates like any private health plan. Healthy Texas was developed by the state, but private health insurance companies provide the coverage. Behind the scenes, Healthy Texas uses a state-funded pool to reimburse participating insurance carriers for some of their high-cost health care claims. By leveraging a combination of public and private funds, Healthy Texas builds on the existing employer-based health insurance model.  It is not part of federal health reform or a federal program.

Healthy Texas costs an average of 30 percent less than comparable employer health insurance plans and offers comprehensive benefits.

Even the smallest companies may be eligible. Healthy Texas was designed to help small businesses that have not offered health insurance benefits within the last 12 months. Eligible businesses are those employing between 2 and 50 eligible workers (including the owners) who work at least 30 hours a week, and 30 percent of those employees are paid annual wages of $32,670 or less.

The employer must pay at least half of employee monthly premiums and the employee is responsible for deductibles, co-insurance, and co-pays. Healthy Texas offers several deductible choices.  At least 60 percent of full-time employees without health insurance must enroll in the program.

The Healthy Texas enrollment process is easy and straightforward. An employer should contact one of the two participating providers, UnitedHeathcare and Celtic Insurance, and submit a short verification form that determines eligibility and allows a rate quote to be generated. Rates are determined only by business location and employees’ ages and genders, not by the medical history of a firm’s employees. Once an employer makes a decision about purchasing a Healthy Texas plan, the employer completes a more detailed application form.

For more information visit the TDI Healthy Texas website, www.healthytexasonline.com, or call 1-800-252-3439. Or visit the website of one of the participating providers, Celtic Insurance at www.myhealthytexas.com, or UnitedHeathcare at www.healthytexasuhc.com, to learn more about available plans, what they cost, and how to enroll.

SCORE Volunteers Make Dreams Come True

Q: I’m at the age of retirement and have an opportunity to sell my business.  Although I’d like to slow down, I’m not ready to stop working entirely. Any advice?

A: Why not spend some of your time helping promising entrepreneurs start or run their own small businesses?  You could share your business expertise, give back to your community, gain satisfaction from seeing others succeed and connect with like-minded people by volunteering with SCORE.  Each year, SCORE counselors touch thousands of lives, generously sharing their knowledge and experience so that entrepreneurs can realize their dreams of business success.

Nationwide 13,000 men and women in 364 SCORE chapters donate their time and talent to assist America's small businesses.  At SCORE Houston, volunteers provide confidential one-to-one and team business counseling and low-cost training workshops and seminars. In addition, many counselors are virtual volunteers, providing email counseling directly from their homes or offices. SCORE members can not get paid for the services they provide to our small business clients.

Whether you have owned your own small business, come from a large company, are retired, are a college student, or just have a sincere commitment for helping small businesses or volunteering, there is a place for you at SCORE.

Whatever their background, SCORE counselors share a belief that small business owners are more likely to succeed if they have a business mentor to guide them.  We currently are seeking new members of diverse backgrounds and experiences to complement our current team of over 70 volunteers in the Houston area.

Our members choose from a variety of ways to contribute to our mission. Most of our counselors are focused primarily on helping aspiring entrepreneurs develop their business plans and launch their first business.  Many work with clients to find the financing needed to start or expand a small business.  Others are involved in organizing client educational sessions, carrying out our chapter outreach programs, or important administrative functions.

New members go through an orientation program to get familiar with SCORE and comfortable with the counseling process.  All members stay up-to-date by attending regular monthly training sessions.

In Houston, we share offices and work closely with the Small Business Administration.  We have several satellite locations throughout the city.  Check out our web site, www.scorehouston.org.

If you have any questions or would like to volunteer, please e-mail us at scorehouston@gmail.com, or, call our office at 713-773-6565 and request a call from our membership coordinator. 

Financing a business with retirement funds

Q: I’d like to buy a business but most of my funds are tied up in a rollover IRA. Is there any way to use those funds for a new business?

A: Yes, you can invest your retirement account funds in your own business. This can help get you off to a good start by building equity and reducing the need for debt and cash flow. These are important factors for the long-term success of your business.

Funding a small business through the use of retirement plans is ever more prevalent in today’s economic environment, as bank loans and other sources of capital have become more difficult to obtain. It can be attractive for individuals who have suffered from downsizing, closures and lay-offs or who have just retired early.

This type of self-reliant funding is available to just about anyone who has an existing retirement plan and who has terminated employment with the employer where the funds were accumulated or for someone who just has an IRA. The money invested through a properly designed retirement plan can be used to fund the start-up of a new business, purchase a franchise, purchase an existing business, and in some instances, raise capital for an existing business.

The process calls for the assets in your existing retirement plan to be rolled over – tax-deferred and penalty-free – into a newly established qualified retirement plan for you and your new company’s employees. Then the new IRA assets can be invested in the stock of the new company as well as mutual funds, individual stocks and other types of investments.

At the completion of the process, your new company can raise cash from the sale of stock to the retirement plan which in turn holds company stock as a plan asset. The cash can be used for legitimate investments in the business or to pay legitimate business expenses.

With this type of funding, it’s extremely important to consult with a firm that specializes in retirement plan design and administration. As with any qualified plan, compliance with rules and regulations is critical.

Business financing of any kind comes with risks – the risks inherently associated with opening a new business or purchasing an existing one. Before you decide to use your retirement funds, or any other type of financing for that matter, you should ensure that you have a viable business idea, a comprehensive business plan, adequate capital, and the consultation of small business professionals, like those at SCORE,  who can provide advice and guidance for your new venture.

SCORE can provide objective help

Q: In a recent column you suggested that SCORE can help with a makeover of a small business. How do they go about doing that?

A: That column suggested that small business owners may be “too close” to their issues, so, it is often necessary to get an independent, objective review of your business by experts who’ve seen or done it before.

SCORE has a service called the SMART Squad which can provide an objective review of your small business or help with critical problems you may be struggling with.  SCORE, “Counselors to America’s Small Business,” is a volunteer association with counselors who are experienced in virtually every aspect of business management.

“S.M.A.R.T.” is an acronym which stands for SCORE Mentoring And Resource Team.  It is a free and confidential service for owners and/or CEOs of existing businesses.  Businesses may opt to work with the SMART Squad in the form of a “Business Wellness Checkup” or may need more immediate, critical assistance with important issues like employee turnover, competing in your market place or preparing an exit strategy. The ultimate aim is to help small businesses succeed.

Initially a lead counselor will meet with the owner or manager responsible for the full operation of the business.  Then one or more SCORE counselors with the experience necessary to address your specific opportunities or issues will work with you and your people at your location.  SCORE has worked on a variety of projects of varying lengths and complexities.

The SMART Squad can help you become more focused and effective, increase bottom line profits by increasing revenues and reducing costs, or secure funding to grow, restructure or survive.

They go about it by first assessing your needs. An in-depth study of your financial, operational, and sales functions is performed leading to improvement recommendations. Finally an action plan is developed jointly with you. Then you have a free management consultant who is knowledgeable in your business and can act as a sounding board or a troubleshooter.

The SMART Squad will work with the owner or person in charge of the full operation of the business.  The typical client will have been in business for more than one year, have an established office rather than a home office, and have revenues that exceed $100,000 per year.

Learn more about SCORE and the SMART Squad by visiting www.scorehouston.org where you also can request assistance.

Makeover may be just the thing

Q: My business is getting stale. My employees are just going through the motions, my competitors are gaining ground, and the bright ideas have stopped coming. What can I do?

A: A makeover could be just the thing to re-energize your business. It need not be a major overhaul; some minor tweaks may be enough. What’s important is that you recognize the need for action, and to learn all you can to make informed decisions.

In order to identify where changes are most needed, you’ll have to dig for details about various aspects of your business. Remember to focus not just on the individual elements, but also how they all fit together.

For example, has your customer base changed since you first started?  Is it broader or narrower? Older or younger? More upscale or less? You may need a new image, revved-up branding or perhaps just a rewrite of your marketing materials to address the needs of this changing customer base.

Take a hard look at whether your products or services are performing to customer expectations. Remember that your goal should be to exceed expectations, not simply meet them. Perhaps competitors are doing a better job, or maybe they’ve created add-on products and services that you haven’t. Your own customers can help with your makeover if you ask them for feedback.

If your marketing message has never changed, perhaps it’s time to reevaluate and devise a new one. Try revisiting your original business plan. You might be able to recapture some of the insight and enthusiasm you originally had from that document. Think back to your most successful promotions, presentations or sales efforts. Rather than reinventing the wheel, you might be able to update and expand an approach that has already worked for your business.

Don’t be afraid to seek out other perspectives. After all, you may be “too close” to the issues to understand the sources and solutions. Meet and brainstorm with your trusted advisors, mentors, friends, partners, employees, and outside consultants. Ask customers to give you a frank assessment of what you’re doing, how you’re doing it, and what you can do to better serve their needs. The more ideas you receive, the more options you’ll have for getting your business back on the fast-track.

For more business makeover ideas, contact SCORE, America’s free and confidential source of small business mentoring and coaching. Our next column will discuss how the SCORE SMART Squad can help with a makeover.

Customer Service: Smaller Can Be Better

Q: How can a small business compete with the “big store” down the street?

A: When it comes to providing value to customers, size isn’t everything—personalized service is.

This important fact can help distinguish small independent businesses from big box chain stores. It gives small businesses a powerful competitive edge in an age when more consumers expect a high level of service and responsiveness.

Your position at the “front lines” of your business gives you direct access to your customers’ needs, attitudes, and opinions. You know the kinds of products or services they want, when they want them, and how best to deliver them.

To gain these valuable insights, you need to proactively assess what you do and should be doing to keep customers coming back, rather than tempting them to try the chain store down the street.

Start by putting yourself in your customers’ place. How would you like to be treated if you were a first-time customer or a “regular?”  Also consider conveniences. What can you do to make it easier to find items and check out, rather than having to navigate a big-box store’s aisles and cashier lines?

Also visit other stores and service centers, including those unrelated to your business. See what they do that you find appealing, and adapt those practices to enhance your business’s customer experience. Similarly, watch for aspects you don’t like, but be sure to understand the reasons behind problems or poor service, such as understaffing, untrained staff, and limited inventory. This will help prevent similar problems from arising in your business.

How you connect with customers by phone or email will also help differentiate your small business from the sometimes bureaucratic nature of big-box chains. Answer calls promptly and with a friendly greeting. Avoid putting callers on hold for longer than a minute; take a message and respond as soon as possible. If you use an automated answering system, your customer service line should be one of the first options.

Although it may be impractical to handle email inquiries as they arrive, don’t let them sit for too long. Some email systems automatically generate a response to acknowledge the message. Make sure the text is upbeat and friendly—again, the kind of message you’d want to receive. A promise to respond within 24 hours may not be enough. Designate certain times during the day to handle email queries, or assign the responsibility to an employee.

How to get repeat business

Q: Before I started I expected more customers to be returning for more service. What should I do to grow more repeat business?

A: The businesses that personalize customer service gain customers who come back. Your competition may have a product or service that is similar to yours, but with personalized customer service, you can distinguish your company.  Here are suggestions on how to go about it. 

Never let your clients forget who you are. Use every method possible to keep yourself in the front of their minds.

Write thank-you notes once a job is done—and handwritten notes stand out from the crowd. Just letting them know you appreciate their business is good etiquette that can pay off. Make it your business to find out your customers’ special occasions and send a card or flowers to let them know that you remember and value them.

Send them news clips that you think might be of interest to them, even if you don’t currently have a contract with that customer. The next time they need some work, they might call you. 

To get your customers back in the door, try giving them more than they paid for or that little extra that they didn’t expect. Customers should perceive that your product or service has greater value than those offered by your nearest competitor.

It’s not enough to meet your customer’s needs... you have to anticipate them. Look at your business like a customer would. What could you be doing better and what is your competition doing better? Think ahead to what the market is going to be demanding next year and determine what you can do better a year from now.  

Be sure to ask your customers as well. Send them postage-paid response cards or make a questionnaire available in your place of business.   

When a customer stops doing business with you, consider it unacceptable. Find out why it happened and then work to prevent it from happening again. 

Deliver what you promise. Too many people offer hype and then don’t deliver. Delivering a product or service that disappoints is the fastest way to lose your customers.

Remember to listen. Too many businesses advertise the next big thing without considering whether their customers want a next big thing. Your customers will tell you what they really want—if you really listen.  

Customer service doesn’t have to be elaborate to make an impression. Customers will remember the small things.

Customer Service: Smaller Can Be Better

Q: How can a small business compete with the “big store” down the street?

A: When it comes to providing value to customers, size isn’t everything—personalized service is.

This important fact can help distinguish small independent businesses from big box chain stores. It gives small businesses a powerful competitive edge in an age when more consumers expect a high level of service and responsiveness.

Your position at the “front lines” of your business gives you direct access to your customers’ needs, attitudes, and opinions. You know the kinds of products or services they want, when they want them, and how best to deliver them.

To gain these valuable insights, you need to proactively assess what you do and should be doing to keep customers coming back, rather than tempting them to try the chain store down the street.

Start by putting yourself in your customers’ place. How would you like to be treated if you were a first-time customer or a “regular?”  Also consider conveniences. What can you do to make it easier to find items and check out, rather than having to navigate a big-box store’s aisles and cashier lines?

Also visit other stores and service centers, including those unrelated to your business. See what they do that you find appealing, and adapt those practices to enhance your business’s customer experience. Similarly, watch for aspects you don’t like, but be sure to understand the reasons behind problems or poor service, such as understaffing, untrained staff, and limited inventory. This will help prevent similar problems from arising in your business.

How you connect with customers by phone or email will also help differentiate your small business from the sometimes bureaucratic nature of big-box chains. Answer calls promptly and with a friendly greeting. Avoid putting callers on hold for longer than a minute; take a message and respond as soon as possible. If you use an automated answering system, your customer service line should be one of the first options.

Although it may be impractical to handle email inquiries as they arrive, don’t let them sit for too long. Some email systems automatically generate a response to acknowledge the message. Make sure the text is upbeat and friendly—again, the kind of message you’d want to receive. A promise to respond within 24 hours may not be enough. Designate certain times during the day to handle email queries, or assign the responsibility to an employee.

Pin down risks right from the start

Q: I’m opening a new business but must go into debt to do it. Pretty scary! How can I protect myself?

A:  ‘Do your homework’ before you get started which is another way of saying prepare a good business plan – and, the better the plan, the lower the risk.

Many who are just starting out claim they have no risk or just ignore it. There are always risks, and that’s good, because, without it, the potential gain is minimized if not eliminated. But, too little risk, just like too much, can sink a company before it ever gets off the ground. How can you walk the thin line and manage risk instead of having it manage you? 

Assess risk in your business plan. Ask yourself what could go wrong to adversely affect your business, and then clearly explain how you will deal with the risk.  Choose a business form that gives you appropriate liability protection, and add plenty of contingency in your cash flow forecast for unplanned events.

Sometimes taking the risk and its financial burden is prudent. If you're a one-person graphic-design business, no employees are going to be injured on the job, nor, are you likely to be sued for personal injury if clients infrequently visit your office. However, if you own a bakery that has 30 employees, you should be protected against employee injuries or a customer tossing their cookies because of eating one of yours.

The basic business insurances are workers' compensation, general liability, auto and property/casualty plus an added layer of protection over those, often called an umbrella policy. In addition to these, you also may need business interruption, key person, errors and omissions, life, or disability insurance.

Establishing company policies to address potentially risky situations helps to defend yourself against a claim. If you demonstrate due diligence in protecting people and otherwise diffusing potentially risky situations, you’re in a much more defensible position in the eyes of a judge or jury. Consider procedural policies for such things as employment practices, equipment management, and vehicle and workplace safety.

Have a back out plan so that you close up shop if certain minimum performance parameters are not met by certain dates – breakeven point, monthly sales, net monthly cash flow, or whatever else makes sense for your business.

Risk analysis shouldn’t stop after getting through the start-up period. Your business environment will change. Create your own risk factor checklist and review it periodically. 

How to Survive the Seasonal Sales Cycle

Q: Any tips on how to survive a highly seasonal small business?

A: For many retailers the holidays are a time when they encounter a huge spike in business. Seasonal businesses dedicate a large part of the year preparing for those certain weeks or months when most of their revenue is generated.

Those boom times come at a price—financial survival throughout the remainder of the year when business slows to a trickle.

To help smooth the bumps it will be important to create a tight budget and stick to it throughout the year. Create a special cash reserve account for use only in leaner months. Set money aside whenever you can. Creating a cash flow forecast will help you identify patterns and see what you are up against. Include a worst-case plan to anticipate any nasty shocks.

Operating a seasonal business also requires that you plan and use your time more efficiently than other business owners. Some periods may call for only 25-hour workweeks, while others go far beyond that. To make sure everything gets done and also avoid burnout, you’ll need to schedule your time carefully.

Put slower times to good use by using them to update your Web site, catch up on maintenance, strengthen customer relationships or write marketing plans. You may want to employ only a small core of permanent workers and use temps or interns to fill in. Consider offering off-season sales or rates, and look for ways to generate revenue during quieter periods.

Owners of seasonal businesses can also take advantage of CAPlines, an umbrella SBA 7(a) loan program providing guaranteed loans designed to help small businesses meet short-term and cyclical needs for working capital. With the Seasonal Line, your business must have established a definite pattern of seasonal activity. Eligibility is based on the size and type of business, how the loan will be used, and the availability of funds from other sources. To learn more about CAPlines, click Research SBA Loan Programs under the Loans and Grants section of www.sba.gov, then go to Special Purpose Loans.

To learn more about operating seasonally, contact SCORE, America’s free and confidential source of small business mentoring and coaching. SCORE is a nonprofit association of more than 12,000 business experts nationwide and 90 in the Houston area who volunteer as mentors. SCORE Houston offers low-cost seminars and workshops. Visit www.scorehouston.org to learn more about valuable SCORE resources.

Help with worker classification issues

Q: When I started my small business a few years ago, I paid my workers appropriately as independent contractors because I was using them on a project basis without a lot of supervision. As my business has grown, though, I’ve evolved to the point where I use them continuously under my supervision and they really should now be classified as employees. Is there any way that I can switch their classification without exposing myself to heavy IRS penalties and back taxes?

A: It’s not unusual for employers to find themselves in this situation. Fortunately, the Internal Revenue Service recently released a new program that can provide the relief you are looking for. This new IRS program is called the Voluntary Classification Settlement Program (VCSP) and is meant to encourage employers to come in compliance with respect to their worker classifications.

The program allows employers to voluntarily correct misclassification issues going forward for workers who had previously been wrongly classified as nonemployees or independent contractors. While providing protection from the possibility of an employment tax audit for prior years, it offers substantially reduced costs for reclassifying workers.  

A business owner who participates in the VCSP agrees to treat the class or classes of workers as employees for future tax periods for employment tax purposes. The employer will pay 10% of the employment tax liability that may have been due on the compensation paid to the workers, calculated at the reduced rates for the most recent year with no liability for any interest or penalties. For example, an employer who misclassified workers and paid them $100,000 in 2010 for wages below the Social Security wage base would owe only $1,068 in employment taxes, rather than $10,680, plus interest and penalties, for that year. 

Organizations considering this program should keep in mind that the IRS is in the midst of a three-year program that significantly increases the number of worker classification audits.
There are more details to the program than I can describe here. But this may be a good time to “clear the air” with the IRS with respect to employee classifications with minimal cost and exposure. Deciding who can legitimately work as a contractor and who must be given employee status has become a difficult matter for small business owners. So, consult with your CPA or tax attorney to get advice on how best to take advantage of this opportunity.