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The U.S. Census Bureau reports that franchises accounted for 10.5 percent of businesses with paid employees—a total of nearly 8 million workers—in 2007 (the most recent year for comprehensive data). For many aspiring small business owners, this can be a very effective way to get into business, as owning a franchise eliminates the need for a “big idea” and comes with the requisite market experience.

TJ Ajmeri was used to serving customers, as the son of parents who owned a convenience store in New York City. After finishing his MBA and acquiring experience in hotel management, he noticed a new franchise, Pollo Campero, gaining traction in markets with large Latin American populations. He spent three months analyzing traffic flow and talking to local vendors before he decided to open a Pollo Campero franchise in Trenton, New Jersey.

Not all franchise operations are created equal, according to TJ. He mentions three major variables:

1) Amount of money needed to launch (total $750,000 for TJ’s location)
2) Size of franchise fee required ($40,000 for Pollo Campero)
3) Degree of support provided by the franchisor (superb in the case of Pollo Campero)

All of these factors combined with your own due diligence can make or break the experience.  Unhappyfranchisee.com was a very valuable resource for TJ when he was doing his homework on good and bad franchises.

Today, a year and a half since opening, he and his partners are supporting themselves from the business and he is hoping to open another store.

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The post BLOG: Is Crowdfunding to Be Crowdless? appeared first on CareerFuel.

As of today, entrepreneurs are essentially limited to selling ownership in their company to accredited investors using private placements. An entrepreneur can hire a securities attorney, create the written materials and peddle the deal directly to wealthy individuals. Total costs — primarily legal fees — for raising $1 million or less run 2-4 percent. Online platforms like Angelist, Gust and EquityNet are new and exciting options where costs can run 4 percent or less because of the efficiencies of bringing the audience to the issuer and the deal flow to the investor with standardized offering materials and, more recently with the launch of Angelist Docs, closing documents. More than $2 billion has been raised to date on these sites, and the total amount per deal is growing. Rally.com raised $7.9 million, of which $4.4 million was through Angelist. Another choice is to utilize a broker-dealer or investment bank at a total cost of 8-10 percent, including legal fees. This option is practical only for firms raising millions of dollars, as it isn’t cost-effective for these intermediaries to get involved at $1 million.

Friends and family are believed to be the primary source of capital, but this is generally done under the radar with very few individuals as a result of legal restrictions. The upshot: entrepreneurs turn away people who want to invest because there is no cost-effective way for them to invest under current law.

The JOBS Act is designed to remedy this. Anyone would be able to invest a limited amount of money (based on income and net worth) in start-up companies in exchange for ownership in the form of debt, equity or revenue-sharing. The problem is that based on what is written into the law, it looks like crowdfunding will be the most expensive option, with fees projected to be 8-20 percent.

The largest costs to complete a $1 million fundraising campaign — the maximum allowed under the JOBS Act — include: $40,000-$80,000 to the online platform (assuming the same 4-8 percent fee structure of donation-based crowdfunding platforms); $20,000-$40,000 in legal fees to create the offering document and closing statements; accounting fees of $15,000-$75,000 for an audit (required for offerings of $500,000 or greater); and due diligence costs of $1,000-$10,000 to complete background checks for all officers, directors and persons owning more than 20 percent of the company.

These high costs are potential “market killers” for three reasons. First, if up to 20 cents of every dollar is spent on fundraising, the entrepreneur will have a difficult time achieving the business-building objectives envisioned by the business plan. Second, these costs are significantly higher than other options available today. Third, the success of a crowdfunding campaign comes down to the entrepreneur’s ability to “socialize” the campaign to their network. Unlike the online private placement alternatives, the entrepreneur has to bring the audience to the crowdfunding platform, resulting in considerably more effort.

To enable equity crowdfunding to be competitive, the cost of capital needs to be, and can be, lowered by:

• Raising the $1 million cap. The current limit is impractically low. Given fixed fees associated with complying with regulatory requirements, the current $1 million cap creates an extremely unappealing cost ratio.

• Eliminating the need for an audit. The currently required auditor involvement is an unnecessary constraint. Today, most start-ups funded through friends and family have little if any historical financial results of any significance. They sell their story on business models and financial forecasts, neither of which are appropriate subjects for review or audit by an independent accounting firm. Accredited-investor-only private placements have no audit requirement and are much more likely to involve companies with meaningful financials.

• Requiring uniform selling and closing documents. This will substantially reduce legal costs and will facilitate greater transparency to the average small investor if all crowdfunding campaigns are presented in a standardized fashion. Crowdfunding portals including those without a broker-dealer partnership should be allowed, if not required, to offer these templates.

Many details of the JOBS Act crowdfunding provisions have been left to the SEC to design and implement through rulemaking. We suggest that our new commissioner, Mary Jo White, consider the spirit of the JOBS Act and promulgate regulations that will encourage use of the crowd and expand the pool of investment capital and thus create jobs, while walking the balance beam to keep fraud in check. To do so, some thoughtful and creative tinkering with the base model will be necessary to make it cost-effective. No easy task, but Chairwoman White is no stranger to getting tough jobs done.

This article was co-authored with securities attorney Donald Murray, partner at Covington & Burling LLP and originally appeared in The Hill on May 13, 2013.
photo credit: alexkess via photopin cc

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The post BLOG: Find Work: Later CAN Be Better appeared first on CareerFuel.

Innately sweet and raised by a mother who fostered several children, Leigh was able to decline the offer and remain on good terms with her would-be employer. The hiring manager expressed her gratitude and encouraged Leigh to apply in the future for positions that might be a better fit.

Making Connections

Following graduation, Leigh and her boyfriend evaluated where they wanted to find work and live, settling on Charlotte, North Carolina. Upon hearing about Leigh’s move, her Aunt Joan asked her friend Nancy (who was from Charlotte) if she had any ideas for Leigh’s job search.  “I liked Leigh right away and was flattered that of all the places she could have picked to live, she chose my hometown”, said Nancy.

When Nancy was 40 and had three young children, one of whom was disabled, she lost her husband.  Nancy understood all too well what it was like to need work and had been fortunate enough to turn her volunteer service into employment working in social services.  

Decades later and remarried, Nancy found herself in a position to help others. Seeing a spark in Leigh, she introduced Leigh to the agency that placed her son in his residential home and also introduced Leigh to her daughter who worked for a different social service agency.

With Nancy’s recommendation, Leigh met with the agency and began working with them on a part-time basis. Leigh continued to keep in touch, frequently emailing Nancy with updates as the months went by.

During this difficult time she remembered, “When I was in graduate school, I joked around about how I wasn’t concerned about getting a job, because really… who wants to work in Child Welfare? After I graduated and turned down the Family Assessor position, I assured myself there would be more options. Time went on and I started to re-think the position I turned down, but my awesome support system kept helping me remember the reasons I turned it down. I remained cautiously optimistic that something would come around soon. I had struggles working in a part-time job that didn’t require a college education, but I knew I would reach my goal soon, as long as I kept working towards it.”

In late February, many months after moving to Charlotte and after regularly checking several websites for new job postings, Leigh’s wish list job of a Foster Care Social Worker surfaced. She applied the week the job was posted, interviewed, was offered the position soon after the interview, and started on April 15.

Lessons Learned

Leigh says, “My best advice is to surround yourself with people who believe in you and even if you’re feeling down on your luck, you have to remember to keep working hard and your time will come.”

Broadcast your job needs to your family. Say yes to help. Trust your gut enough to say no to the wrong job, even if it means sacrifice. Keep all your patrons informed along the way. Don’t wait for companies to notify you of jobs—even those that try to hire you and say they still want you. Assume they won’t make the first move and proactively follow their websites. Pounce immediately when the job is posted and call in your network to vouch for you.

P.S. Last names have been omitted due to the sensitive nature of Leigh’s work and to respect the privacy of Nancy’s special-needs son.

photo credit: University of Denver via photopin cc

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The post BLOG: Big Business for Small Business appeared first on CareerFuel.

Jose Li spent years managing shipping as an executive for the Jamba Juice retail chain. His time at Jamba Juice was followed by a six-year stint with FedEx, where he was hired as Principal of Retail and eCommerce. In 2010 he left to launch a technology company designed to save small businesses shipping expenses.

At Jamba Juice there were 2½ people handling logistics for 450 stores. Jose had a number of ideas for cost savings, but no resources. One such idea was to track late shipments by FedEx and UPS and request refunds. Based on guarantees offered by both shipping giants , the 4-7% of overnight shipments and 2-4% of ground shipments that do not arrive on time qualify for a full refund.

While at FedEx, Li noticed that large corporations were getting refunds for late shipments because they had the staff and resources to devote to such matters and new companies were launching to help them execute it. He also noticed that fewer small businesses were able to do the same. What was missing for these small businesses was effective software that made it easy for them to track their refund opportunities.

This was the inspiration behind 71lbs.com—create a fast, easy, and automatic way for small businesses to realize those refunds.

Shipping is a big expense for eCommerce companies. According to Li, Founder and CEO of 71lbs.com, shipping expenses for small businesses average 10% of sales. In 45 seconds, he can lower those costs by 5%, by tracking late shipments by FedEx and UPS and sharing the refund with the business. That’s a pretty good return on time!

To get this far, Li has used personal funds and raised additional capital through friends and family. He also completed the highly selective TechStars Chicago Accelerator program, enabling him to obtain additional financing from New World Ventures and a few other angel groups.

For those aspiring entrepreneurs who think they have to create a breakthrough product, 71lbs is instructive. Competition already existed (e.g., Shipwire, PackageFox) and the industry faces certain death if FedEx and UPS discontinue the shipping guarantees that begun 10 years ago, which create the refund opportunities. Li’s experience in shipping with both a shipper and a carrier gave him the credibility to convince TechStars and investors that he knew what he was doing.

Today he focuses on the small business segment, creating superior software to meet their needs. Sales are strong thanks to his telesales, direct and partner marketing. We hope they continue that way. One aspect of the company’s mission to help “democratize shipping for the small business guy.” It’s nice to see someone worrying about the little guy and cutting us a break!

The post Big Business for Small Business appeared first on CareerFuel.

If you think that you need capital in order to start that small business of yours, think again. Startup money is great, but it also makes you think in sloppy ways. A shortage of available cash, on the other hand, forces you to think creatively to achieve your business goals and helps you navigate around pitfalls, which stand between you and success.

Here are 3 reasons why having no dough in the startup phase can be used to your advantage.

The post BLOG: 3 Reasons Why No Startup Capital is Good for Your Small Business appeared first on CareerFuel.

If you think that you need capital in order to start that small business of yours, think again. Startup money is great, but it also makes you think in sloppy ways. A shortage of available cash, on the other hand, forces you to think creatively to achieve your business goals and helps you navigate around pitfalls, which stand between you and success.

Here are 3 reasons why having no dough in the startup phase can be used to your advantage. 

1. Become A Hardened Businessperson

It’s a basic law of evolution – when your surroundings are arduous, you learn to adapt in order to survive. You can’t afford to be lazy and complacent. And so, you learn to become shrewd, resourceful and clever. You begin to think outside the box for solutions to your problems. You learn the art of taking calculated risks.

For example, when throwing a few thousand dollars on a PPC (pay per click) campaign to test market response is not an option, you might investigate options which don’t cost money and which are easy to resist (which, ironically, tend to be more effective) – like talking directly to people about their needs.

This process of struggle can be very useful in helping to dramatically sharpen your value proposition and learn skills, which will help you outmaneuver your more cashed-up, lazy, competition.

2. Avoid The Seminar Junkie Trap

Because you can’t afford to throw money around, you also become less susceptible to the sales pitches of all the so called “business gurus” out there who are just itching to sell you their “money-making secrets”, seminars and “businesses-in-a-box”.

And there’s no shortage of those. They’ll take thousands of dollars of your money and promise that ownership of your dream business is just around the corner. They’ll sell you a dream that apart from their secrets/software/products, you don’t need to do much else.  Some will even suggest to you that you can be in business even if you don’t know what problem you can solve in a marketplace and don’t have a product or an idea. 

The trap there is that you can spend a few years and many thousands of dollars, being a seminar junkie. You’ll end up knowing a lot of business theory and will probably end up owning a dozen domain names and all kinds of weird software.  

But when someone asks you about what value you deliver, you don’t know how to answer that question. 

3. Stop Being A Copycat

When starting a business, there’s a huge temptation to emulate your competitors. You may check out their websites to get “inspiration” for your own web copy. Or you look at the way they package their offerings and make yours a tad different – usually by claiming that yours is a tad better while making it a bit cheaper.

And if you have money to burn, you can pretty much copy their business model, marketing and offering – and purchase everything you need to launch your own version of their business. 

Or so it seems on the surface.

Look deeper, and you’ll see problems with this “rich guy buying his way into a marketplace” approach. The main problem is that the things you can easily replicate are rarely what gives your competitors a competitive advantage over you.

And the things you can’t easily rip off – like tested and faultless processes, culture, customer relationships style, company philosophy and IP – sit at the very heart of your competitors’ businesses – and are instrumental in their success.

Which means that if you try to buy your way into business by copying your competitors, you’ll probably end up spending a lot of money on things that don’t give you much power in the marketplace.  

In Conclusion

If you’re serious about starting a small business and you’re planning to do it with little or no startup capital, you’re going to live through a trying and potentially stressful time.

You’ll find yourself outside your comfort zone and, like most entrepreneurs, will have days where you feel like giving up.

However, this very act of building and managing a business that has little resources and can tolerate even less error, will teach you invaluable lessons.  You’ll grow as a human being and as an entrepreneur, and you’ll learn lessons that would have otherwise taken you years to learn had you had more funds.

The best part is, when you look back on your business, and compare where you were to where you are today, and you say that you created this all on your own… You slogged it out. You made your dream happen the hard way… that will be satisfaction unparalleled. 

Irene Kotov is the founder of Arielle. Through resume writing services and interview coaching, she ensures her client’s presentation of their most authentic and inspiring self through the recruitment process. 

photo credit: danielmoyle via photopin cc

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The post 3 Reasons Why No Startup Capital is Good for Your Small Business appeared first on CareerFuel.