NYC Business Solutions

The Break Even Burger - a Lesson in Financial Management The burger is making a comeback in...

Mon, 20 Feb 2012 09:32:00 -0500

The Break Even Burger - a Lesson in Financial Management

The burger is making a comeback in Brooklyn! In the past year alone nearly half a dozen burger joints have opened in the borough, to much fanfare and acclaim. The upstarts include Moo Burger in Cobble Hill, a creation of two-time “Chopped” winner Chef Marc Anthony Bynum, the expansion of Fort Greene favorite 67 Burger to a second location and the debut of 282 Burger on Atlantic Avenue. The success of these gourmet burger joints has caused larger chains to take notice, with Shake Shack and Smash Burger opening their first Brooklyn locations.

Before you run out to open a burger joint of your own, let’s explore a simple equation that separates these successful restaurants from those that fail. A break even analysis is a quick way to gauge the feasibility of your business idea by calculating how many burgers (or units) you need to sell to cover all your expenses.

Many business owners don’t know their break even point so they don’t know when they are doing well or are headed for a cash flow crisis. Having no clear quantitative goal hampers their financial management and business health.

Let’s cover a few key terms before we calculate the break even for our burger joint:

Break Even: The number of units you will need to sell to cover all your expenses and stay in business.

Fixed Costs: All your monthly business expenses not including inventory/ingredients. Fixed costs should include rent, utilities, insurance, salaries, etc. To keep things simple, we’ll assume Manny’s Burger Joint spends $4K in rent, $1K in utilities, and $2K on its staff: a total of $7K monthly.

Variable Costs: Sometimes called cost of goods sold (COGS), variable costs are the amount the business owner pays for the product he is selling. Our burger joint spends $3 on ingredients for each delicious burger. Keep in mind that some industries, like many services, have minimal variable costs.

Selling Price: The price you charge your customers for your product. Although most businesses have many different products with varying prices, it helps to choose one main product to start. In this case, we will be looking at a $10 burger.

So how do we figure out how many burgers we need to sell?

Break Even = Fixed Costs / (Selling Price - Variable Cost)

Or in the case of Manny’s Burger Joint:

Break Even = $7,000 / ($10 - $3) = 1,000 burgers

Now we know that Manny’s has to sell at least 1,000 burgers every month to stay afloat. We can easily figure out that 1,000 burgers a month means 250 burgers a week, or about 42 burgers a day, if Manny’s is open six days a week. Is this a feasible business? One great way to find out is to visit a couple of similar restaurants to get a sense of their foot traffic at different times of the day. Operating businesses can use this type of analysis to assess their financial health by simply comparing their break even point to their actual sales.

Finally, the break-even equation can always be tweaked to test different scenarios. For example, what if Manny’s finds a cheaper beef distributor? This would reduce our COGS to $2. By saving money on ingredients, Manny’s now only has to sell 875 burgers per month. On the other hand, we could decide to take a bigger salary which would increase our fixed costs and our break even.

I have sat with business owners, rookies and seasoned veterans alike, who are terrified of numbers. The best advice I can give is not to get too hung up on the details. Are our assumptions perfect? No. Will our calculations be dead on? It’s unlikely. Like a good cheeseburger, it’s all a bit hastily put together and sloppy, but the point of this initial analysis is to get a ballpark number. Take a few minutes to calculate your own break even point and next time you eat a Brooklyn burger, think of all those delicious variable costs!

Manuel Dominguez is the Director of the NYC Business Solutions Centers in Brooklyn. If you have a question or comment for Manny, drop him a note below. And, please share this blog entry with your colleagues on Facebook and Twitter.

Restaurateurs: Get the Help to Help More Restaurant owners are notorious for doing everything...

Sun, 19 Feb 2012 15:21:00 -0500

Restaurateurs: Get the Help to Help More

Restaurant owners are notorious for doing everything themselves – because they have to and because their way is what distinguishes them from every other restaurant.

But being the chef, CEO, bookkeeper and bottle-washer can be exhausting!

The best way to ensure the success of a restaurant is to slowly train reliable staff to take on more and more responsibilities. The table below shows how you can use training to create new roles for your star staff:

Training can be accomplished through a variety of methods. Consider expanding the type of staff (front-of-house, back-of-house, or entry-level staff) that you use as trainers and the ways you share information. Some creative trainings used by restaurants include:

1. ROLE PLAYING

For example, here is a brief role-playing exercise to teach servers to up-sell holiday reservations:

Server: Thanks again for coming in tonight. Did you enjoy your evening?
Customer 1: Yes, very much!
Server: Great! If you’d like to share this experience with your co-workers or family, we’re taking reservations now for holiday parties and catering events. Do you have any plans?
Customer 1: I haven’t even thought about the holidays yet!
Server: I know what you mean, but we book up so quickly and I like to give our customers the first shot at our prime times.
Customer 1: You know, our book club wanted to have an ornament exchange in December. Maybe I should reserve a table now. There’ll be 12 of us.
Server: Great! Let me get you our hostess and we’ll make sure you have a great spot.
Customer 1: Thanks!

2. CROSS-TRAINING

Do you have a dishwasher that is dedicated? A prep cook who seems to always “make it work”? Consider cross-training them to take on specific responsibilities at busy times.

3. CLASSROOM LEARNING

Don’t be afraid to take your back-of-house staff off the line or front-of-house staff off the schedule to send them to class. Research shows that adult learners understand best through a combination of classroom and hands-on training. If you are training your staff by shadowing or observing, you are still paying for them to learn, but may be missing the best way for them to pick up information quickly.

Consider sending your star performers to training offered by NYC Business Solutions. The curriculum was designed with input from over 150 restaurant owners across the country. More than 30 NYC restaurants and foodservice businesses have participated. Learn more about this free training by visiting: www.nsyra.org/training.

Sara Schlossberg is the Executive Director of Training for NYC Business Solutions. Please ask Sara your questions about how to best train staff using the comments section below! And, please help your friends out by sharing her post on Facebook and Twitter.

3 Tips for Business Growth For all of you entrepreneurs out there who are swamped with the...

Tue, 14 Feb 2012 10:51:00 -0500

3 Tips for Business Growth

For all of you entrepreneurs out there who are swamped with the day-to-day operations of your business – and we know that is almost all of you – we are passing on 3 big lessons from Strategic Steps for Growth, a nine-month executive business management education designed for minority and women-owned businesses offered in partnership between NYC Business Solutions and the NYU Stern School of Business’ Berkley Center for Entrepreneurship & Innovation.

1) Always look for the bigger picture. It’s very easy to get caught up in the details of the business and lose sight of the big picture. But, stepping outside of your business model and hearing how other entrepreneurs have tackled specific challenges and avoided financial pitfalls, can help you solve some of your toughest problems.

Cheng Ong, a recent graduate of Strategic Steps for Growth and the head of Tydas, Inc., a Manhattan-based consulting firm specializing in IT services gave an example: “I have finally figured out how to calculate COSS (cost of services sold) for my business after struggling with it for two years by seeing how other firms work it out. This allowed me to figure out my profitability, reassess my pricing strategy, and perform budgeting and planning”.

2) Neglect marketing and business development at your own risk. Small business owners can get mired in the day-to-day transactions of the business and forget all about developing the business. A costly mistake is to neglect creating a strategy to attract new business or even just retain customers. Included in that strategy should be a marketing plan and budget. (See related post on Top 6 Marketing Tips for 2012.)

3) Sometimes growth means change. The true benefit of spending some time on your business and thinking strategically is realizing that for your company to grow, you might have to change either a facet of your business model, or maybe even your entire business model.

“That’s not a bad thing,” adds Cheng. “To look at your business in a whole new light and to get excited about it again – that’s worth the time commitment. For example, one of my classmates realized that they would have to restructure their entire employee base. Another launched a new website after going through the marketing module. And I have decided to create a second business to capture an emerging technology market”.

It’s hard for small business owners to find time for anything – but making an investment of time to think strategically about your business can have a huge return.

If you are interested in enrolling in Strategic Steps for Growth, visit our website.

Anne Rascon is the Deputy Commissioner of the Division of Economic and Financial Opportunity at the NYC Department of Small Business Services. In this role, she oversees the Selling to Government and Certification services of NYC Business Solutions.

If you have a question or comment for Anne, please drop her a note below. And, don’t forget to share her column on Twitter and Facebook.

Increase Your Startup’s Chance of Survival Most startup businesses will not survive their...

Mon, 13 Feb 2012 07:00:00 -0500

Increase Your Startup’s Chance of Survival

Most startup businesses will not survive their first five years. The main killer is the owner underestimating the costs to start and operate a business.

Why does this happen? Early on, a lot of business owners take on unnecessarily high expenses, such as rent that can negatively impact their bottom line. Rent usually includes other line item expenses that erode your profits like insurance, renovations, inventory and utilities. Need a solution? Start a business without these costs!

Five things a startup business can do to lower their expenses are:

1. Start off at an incubator

2. Sell online

3. Shrink your marketing budget by using social media

4. Create a virtual office

5. Decrease your product line.

Recently, my friend Brian started his own business, Nah-Meen Studios LLC. This was Brian’s first business venture. How did he make it happen?

1. Business Idea: In June, Brian proposed the idea of creating a casual game about “falling cats” to his friend, Bradley, who loved the idea. Bradley created the name “Meowch!” and began designing sketches.

2. Research: All business owners have to do their homework! Brian and Bradley researched mobile software development, and found a cross platform development tool called Corona SDK. They found free web hosting for their website through Heroku and built their website.

3. Create It: Brian did the coding, while Bradley created the artwork. Both Brian and Bradley spent around 1,000-1,200 hours each creating Meowch. They both maintained full time jobs while working on the business.

4. Set up the Business: How do I start a small business? Like 7,666 other people in 2011, Brian reached out to NYC Business Solutions and took advantage of our assistance. I explained to him the process to setting up the business and the business structure options that would address their needs. Brian and Bradley wanted 50/50 ownership. A Limited Liability Company was formed NY State Department of State in October 2011. This was the first significant expense for the business.

5. Product Launch: Once the game was ready to go, they submitted to Apple for approval on December 30^th. By January 8^th, Meowch became available on Android and IPhones for $1.99. Apple and Android take 30% of the sale, so the business takes in $1.40 per purchase. Within two days, Meowch had upwards of 3,000 unique users a day.

6. Adjust: The game had great initial reviews. Meowch went global, with purchases notably in the US, China, Brazil, Thailand and the UK. Like all businesses, they experienced a few hiccups along the way, like piracy, which is common on Android games.

They are in the process of launching a free version and an updated paid version that is redesigned with new features.

The only significant costs for the business were forming a LLC, licensing agreements and a few other minor online costs. They kept the marketing budget low, by relying on strong user reviews, press releases, social media, and word of mouth. The biggest investment was their time. One could debate how much their time is worth, but there was very little other financial risk for the business.

Estimated costs for Brian and Bradley: $600 each

Starting a business is not simple or easy. However, entrepreneurs have to be creative in finding ways to minimize costs and maximize profits so that they are poised for success. If the majority of startups are failing because they underestimate costs, break the trend and lower them!

At $1.99 per user, Brian has a long way to go to becoming a millionaire. I’m sure the Executives at Electronic Arts are not trembling with fear that Nah-Meen Studios will put them out of business. However, with proper planning, a quality product, and literally no ongoing expenses, they have create a product that will continue to grow and bring in pockets of revenue with the potential upside of hitting it big.

Brad Seader is the Director of the NYC Business Solutions Centers in Queens. If you have a question or comment for Brad, drop him a note below. And, please share this blog entry with your colleagues on Facebook and Twitter.

Mayor Bloomberg Wants Small Businesses to Step Forward - from Inc.com

Sat, 11 Feb 2012 09:20:23 -0500

Mayor Bloomberg Wants Small Businesses to Step Forward - from Inc.com

Calling all retail owners!

Thu, 09 Feb 2012 10:03:00 -0500

NYC is rolling out a new resource to help you – and other retail entrepreneurs – get to your next store opening faster and easier.

The New Business Acceleration Team will help retail entrepreneurs get the answers and services they need from City government to open their retail store quickly and painlessly. But, first, they want your input. Tell the New Business Acceleration what it was like to open your store and they’ll use your input to make the New Business Acceleration Team work for you.

Click here to take the survey.

(For information on what the New Business Acceleration Team currently does for restaurants, bars, bakeries, and butcher shops, check out Kevin Kelly’s post on cutting through red tape.)

Consider this column a new pair of scissors to help you cut red tape Business owners often cite...

Mon, 06 Feb 2012 19:49:00 -0500

Consider this column a new pair of scissors to help you cut red tape

Business owners often cite complying with government oversight as a difficult and “fraught with peril” process. Multiple mistakes, overlooked obligations, scheduling snafus, and red tape wrangling can all contribute to the time and expense of obtaining the required licenses, permits, certifications, and inspections.

New York City government knows that delivering high-quality customer service and maintaining critical oversight compliance do not have to be mutually exclusive. In fact, we have been working at improving both. Here are two great examples of ways we’re making it faster and easier to start, operate, and expand a business in New York City:

NYC Business Express

NYC Business Express is an online planning and transactional tool that makes it easy to find out which licenses, permits, certifications, and inspections your business might require, and then provides the necessary instructions and application materials in order to apply for them.

2. New Business Acceleration Team

The New Business Acceleration Team, or NBAT, was created to streamline the opening of new restaurants, bars, bakeries and butcher shops by helping businesses get the answers and services they need from City government.

Here’s some more detail about what these resources can do to help your business comply with government oversight faster and easier:

NYC Business Express

Using NYC Business Express you can apply and pay for, online, 57 licenses, permits, and certifications.
You can also check on the status of certain online applications, violations, payments, and authorizations.
You can create customized business scenarios that best describe your business idea or existing business by answering a series of plain-English questions. NYC Business Express will return a customized list of Federal, State and City requirements for your specific business with hyperlinks to individual pages that describe each license, permit, certification, or other requirements, providing process steps, prerequisites, and payment information, and of course application materials and instructions.
There are also “pre-formed” business scenarios that aggregate requirements for common and standard business types. These EasySTART scenarios can help you get a quick idea of which licenses, permits, certifications, and inspections are likely to be required a business type that closely matches your business.
There is a Requirements Index that makes it easy to search for requirements by government level (Federal, City, etc.) and by government agency. And, there is even a search tool that enables you to find government requirements using keywords like “sidewalk café”, “liquor”, “occupancy”, etc.
The NYC Business Express Incentives Estimator can help you determine if your business qualifies for money-saving incentive programs. After answering a series of detailed questions, you will receive a customized list of City, State and Federal incentives for which your business may be eligible. For some incentive programs, the Incentives Estimator can even provide dollar-value estimates of the benefit that you might receive.
NYC Business Express also provides additional useful information about government resources available to help start and grow your business, including programs for recruiting workers, training workers, and business incentives.

New Business Acceleration Team

The New Business Acceleration Team, or NBAT, works with qualifying new restaurants, bars, bakeries and butcher shops to schedule and coordinate most plan review appointments and required inspections and, when appropriate, to schedule multi-agency inspections on the same day. Such inspections include, but are not limited to, those conducted by the Department of Buildings, the New York City Fire Department, the Department of Health and Mental Hygiene, and the Department of Environmental Protection.
NBAT and the Department of Buildings work together to ensure safe and lawful use of buildings and properties while facilitating the issuance of Certificates of Occupancy and Place of Assembly permits.
NBAT will work with qualifying businesses to provide expedited plan exams for new projects and for plans that have been disapproved; NBAT will work with the owner to resolve the issues in accordance with the Building Codes.
Through coordinated efforts, NBAT works with the New York City Fire Department’s Bureau of Fire Prevention to ensure the timely submission of plans and equipment documentation as well as provide inspections regarding rangehood devices and other hazardous installations.
Additionally, the Department of Health’s Bureau of Food Safety and Community Sanitation works in concert with NBAT to enforce the New York City Health and Administrative Codes, ensuring that all food service establishments are properly permitted and operating safely.
Lastly, NBAT inspectors are trained to conduct Department of Environmental Protection grease interceptor inspections ensuring that grease traps are correctly sized to handle grease discharged by cooking and kitchen equipment
Visit the Prerequisites section of NBAT’s website to see if your business meets the program criteria, and if so, visit the Process section of NBAT’s website to find out what to do next.

NYC Business Express and NBAT are designed to make it faster and easier to start, operate, and expand your business in New York City. I encourage you to take advantage of them!

For more on how NYC Business Solutions can help you navigate the government, visit our website.

Kevin Kelly is the Deputy Commissioner at the New York City Department of Small Business Services (SBS) responsible for services to help businesses start, operate, and expand in New York City. Kevin writes a column for New York City businesses on the 1st Tuesday of every month.

If you’ve had an experience with NYC Business Express or NBAT you’d like to share or if you have a question about navigating the government, drop Kevin a note in the comments section. And, please don’t forget to share this information with friends on Facebook and Twitter.

FOCUS: Small Business Marketing in 2012

Mon, 06 Feb 2012 19:48:00 -0500

There’s been a lot of flutter about social media over the last few years. Whether you were running quickly, or watching your competitors make a dash for the web, it’s felt like a virtual gold rush to stake a claim for your business on the cybersphere.

Now that the dust has settled a bit, what can you do to rise above the fray and market smartly?

It’s more than just choosing the right Twitter handle or collecting some Facebook likes. Here are 6 tips to help you successfully market your small business online in 2012.

1. Be where your customers are online.

We’re sorry to state the obvious, but admist all the hype of social media marketing – not to mention the low cost of entry – a lot of businesses have forgotten to think strategically before jumping online. But, since you can’t be everywhere – there just isn’t enough time in the day – spend a little time figuring out where your customers are spending the most time online and then invest your time there.

You may need to do a little due diligence to find where your customers are:

Are there active LinkedIn groups for your market?
Do any of your competitors – or, better yet, partners – have large followings on Twitter, LinkedIn, or Facebook?
When you search online for “blog+NYC+[insert your industry here]” what comes up?
Are there social media sites where info on your business is already posted (e.g., menupages.com, Angie’s List, and Yelp)?

When you find groups of your customers actively engaging – leaving comments, asking questions, sharing content with their own social network – you’ve found a good place to invest your time online!

2. Consciously invest time in your online marketing.

Social media seems casual – the messages communicated online are often written in a conversational tone; it doesn’t cost money to join most social media sites; and, you can do it from your cell phone while walking your dog. But, to do social media marketing well, you need to do it right – which means that it takes time (your time or a team member’s time). Depending on what sites you’ve decided to focus on as part of Tip #1 above, set aside time each week or each day to be interacting online. In addition, set aside time to create content and plan any special online promotions. Those seemingly casual tweets that successful marketers send out are usually not so casual. Successful marketers dedicate time to thinking about what they want to say and how to say.

3. Measure your “free” online marketing.

As we’ve just discussed, marketing takes an investment of time, if not money. As a small business person, we know you don’t have time or money to waste. So, determine what you are trying to achieve with your marketing investment. Are you looking to build brand awareness? Are you looking to identify leads? Once you’ve set your goals, continuously test different ways of getting the results you want. Depending on your business and your goals, your measurement will be different but there are tools that can help you quantify your online presence. For example, Klout attempts to measure your “influence” and American Express launched YourBuzz a few months ago to give you a consolidated look at what people are saying about your company on Yelp, CitySearch, Facebook and other sites.

4. JOIN the online conversation.

If you went to an in-person networking event, you would never barge in and start proclaiming the wonders of your company. Treat an online community the same. Start by listening to the conversation. Join the conversation where you can answer a question, provide a resource, or help someone network.

The act of listening first and then adding value to the existing conversation will pay off two-fold. First, it will enhance your own influence. People will start to see you as someone to go to when they have a question. Second, this respectful, “I-want-to-help” entry into social media will also endear you to partners and other online influencers. The people that already hold sway online will appreciate that you aren’t barging into their party and shouting about your amazing company.

Once you’ve established some credibility as a helpful resource online, you can certainly do some “shouting” about how great your company is. And, at that point, your readers will listen more carefully to the “shouting” because they will trust you and respect you.

5. Respond to comments – both negative and positive.

You have to join the conversation when people are talking about you. People who are already talking about you are great prospects for another sale – and a great opportunity to “shout” about the great care you take of your customers.

So, when someone praises your company, say “thank you.” Offer additional help or membership in any loyalty programs, if appropriate. And, if you are looking for testimonials, ask if the happy customer is willing to be used in other marketing.

Now, for the negative comments: when (not if) someone makes a negative comment about your company, try to see it for the marketing opportunity it is. While a negative comment to YOUR business can be hurtful, it gives you have the opportunity to show prospective customers your caring customer service and to thoughtfully explain why another customer won’t have a similar problem.

So, here’s what to do when you get a negative comment or review:

1. Respond IMMEDIATELY. Don’t let that negative comment sit out in cyberspace untended.

2. Acknowledge the customers complaint and apologize. You don’t have to admit to wrong-doing if you don’t believe you did wrong. But, you should apologize that the customer feels frustrated/angry/etc.

3. Offer a solution. A solution is particularly good if it shows a prospective customer that they aren’t likely to have a similar problem. Can you replace or fix the product/service for free or at a discount? Can you offer them an alternative product/service for free or at a discount? Can you explain (with enough detail to show you actually thought about it and aren’t just giving lip service) how you are fixing the product/service so it won’t be a problem in the future?

Remember, your response is for all the prospective customers who are reading the reviews. Well over half of all consumers rely on user reviews before making a purchase. So, use this opportunity to show that your company cares about its customers, learns from its mistakes, and is fixing any problems.

6. Optimize your website for mobile devices.

The statistics on this are staggering – 67% of consumers use their smartphones to find store locations, 45% to shop online, and, even when a customer is in your store, they still use their mobile device to make a decision – 52% of adult cell phone owners use their phones when they are in a store to make a decision. So, make sure that your website – and blog, if you have one – are optimized for your mobile device customers! Talk to your web designer to make sure that your website is loading quickly and functioning properly on mobile devices.

For more marketing tips, check out a marketing course at one of our NYC Business Solutions Centers. And, you can always ask your business questions on our “Ask the Expert” page.

Check out The NYC Business Solutions Blog on the first of every month for our latest feature story - like today’s article on top marketing tips for 2012. And, if you found this helpful, please share it with your friends and colleagues on Twitter and Facebook.

Plan to Grow Your Small Business The question below was answered as part of our “Ask an Expert”...

Mon, 06 Feb 2012 19:48:00 -0500

Plan to Grow Your Small Business

The question below was answered as part of our “Ask an Expert” series. If you have a question about your business, ask us.

Question: I’ve been in business for five years now and I am considering expanding my product line. I know I will need approximately $100k to do it. Should I go for it? - Chugging Along in Brooklyn

Answer: Far too often business owners speak to me about what they need to make their business go to the next level without referring back to a plan. “I need $100,000 to create and market a new line of pastries.” “I need to open a second location.” “If I get new machinery, I’ll be much more efficient.” I can hear in the business owner’s voice that they are completely focused on their new idea and are determined to make it work.

There’s nothing wrong with focus, and even obsession at times, in making a business idea work. In fact, that focus and the constant quest for the next new challenge are what make entrepreneurs, like you, a unique breed of human being.

The problem is that in those moments of excitement, business owners don’t consider the rest of their business. What will this new line do to the other product lines? Is it complimentary or contradictory in the minds of your existing target market? Do you have the oven space needed to maintain two growing product lines? The only way to answer these questions is to have a PLAN.

Most entrepreneurs think a business plan is something you write before you start a business to help with financing or give you the confidence you need to take the first step. Once it is written it is set aside.

In rare cases, it will be referred to once in a while during the first year of business while the initial idea is still launching. The entrepreneur relies almost exclusively on instincts and hard work to turn an idea into a profit generating business.

The truth is a real plan is a living and growing entity, just like your business. It should be the anchor you refer to in those moments of decision-making. It is a record keeper of previous decisions and the consequences of new ideas.

Each time the itch for change and growth comes you should turn to your plan, plug the idea in and work it through every aspect of your business. It is not so much a business plan, as it is a growth plan.

If you think you don’t have the time for your growth plan, think about the sleepless nights you spend thinking about the future of your idea, the countless conversations you have with others talking through it, and the endless conversations you have in your head convincing yourself to go for it. It would only take a fraction of those hours to rework your plan.

If that doesn’t convince you, think about your existing business and the amount of energy and money you have already invested in getting it to where it is. All of that is on the line every time you decide to push to the next level – not to mention the amount of energy, time, and money you will invest in this new idea.

Considering the next step for your business is a sign of success. It means you have weathered the initial storm and are looking out at the horizon. If you are like the vast majority of entrepreneurs, you will never stop creating new ways to reach new markets and you will always want to be better.

A growth plan will help you predict what is waiting for you around the next corner and minimize the risk that the new idea will not undermine everything else you have built. So, yes, do keep that business plan around as more than a memento. Keep using it to plan for your business. The disciplined effort will help keep you and your business on track in the years ahead.

Visit the NYC Business Solutions website for more information on how we can help your business grow. NYC Business Solutions offers several courses that have proven effective in helping entrepreneurs and small business owners grow, including FastTrac NewVenture, FastTrac GrowthVenture, Strategic Steps for Growth, Corporate Coaching Program, and a Construction Mentorship Program. Follow the links to see which course would best help your business. NYC Business Solutions can also help you grow by improving your chances of accessing financing, helping you train your staff in new skills, access pro bono legal support, and more.

Zahra Amanpour is the Executive Director of NYC Business Solutions at the NYC Department of Small Business Services. If you have a question or comment for Zahra, please drop her a note in the comment section. And, if you found this helpful, please share it with your friends on Twitter and Facebook.

Crowdfunding – a new shot at financing your business When an entrepreneur enters a NYC Business...

Mon, 06 Feb 2012 05:00:00 -0500

Crowdfunding – a new shot at financing your business

When an entrepreneur enters a NYC Business Solutions Center with bags under their eyes and a business plan, I can bet that what they are looking for: FINANCING.

Good news: there has been a shot of innovation in the arm of business financing. It is certainly not a cure-all for every financing ill, but it is enabling a few more entrepreneurs to get much needed sleep.

What is this innovation I’m talking about? CROWDFUNDING.

This is usually the point at which I get blank stares and quizzical looks from not only entrepreneurs but also many of our financing partners.

Crowdfunding has its roots in the entertainment industry and is just starting to bring real and tremendous value to other types of businesses. So, let me clear some of the fog surrounding crowdfunding.

Crowdfunding is basically a way to raise grassroots funds for your business without giving up any ownership or having to pay back any loans.

Sound too good to be true? Well it works, but only in the right situation and with a good amount of effort.

Crowdfunding uses online sites (such as Kickstarter or Rockethub) to raise funds for a clearly defined project. It relies on the entrepreneur to use social media and other means to get the word out about the campaign to all of their contacts and then touches the contacts of those contacts – somewhat like viral marketing.

In exchange for an individual’s contribution, the business sets up a system of rewards for the contributor.

For example, someone trying to launch a new fashion line may promise sketches of a design for a $25 contribution, a dress straight from the designer for $200, and so on.

The scheme can work even better for an existing business that may want to expand. If an entrepreneur has a deli they can advertise their crowdfunding campaign to all of the existing patrons that already love the business through simple signage at the cash register. Perhaps the deli owner wants to buy a new cappuccino machine and needs more funding to do so. They can make promises of 10 cappuccinos for a $50 contribution or perhaps propose the option of naming a sandwich on the deli menu after the donor for a more sizeable amount. In the end, patrons feel as though they are more a part of their neighborhood deli; they get a place nearby to have great cappuccinos; and, they get the item promised for their contribution level as well. The business owner gets to buy the machine that will bring in additional revenue without having to take out a loan or give away equity for the item. It’s a win-win all around.

Of course like anything worthwhile, there is a considerable amount of work necessary to really make crowdfunding work. The entrepreneur has to get the ball rolling with the first contributions, relying on their own networks primarily. Nobody wants to make the first contribution to a project. The entrepreneur really needs to make sure the word gets out through whatever means are at their disposal.

Crowdfunding also works better for a clearly defined project. Claiming that you want to start a new marketing business and need startup funds generally does not really have the grab to get people on board. An entrepreneur needs to know how to sell the project and how to set realistic goals for the crowdfunding campaign. This usually works best when the parameters are clearly defined. For instance, needing $2,000 for supplies to make the first batch of your fabulous quiches, which you will sell at defined green markets in the city on set dates. Maybe in exchange for a certain level of contribution you will share one of your recipes!

Crowdfunding is a creative and viable option for a lot of businesses out there. But, more than anything, it is one more tool to help entrepreneurs realize their business dream. It might not bring in all the money necessary for a business, but it sure can bring in a helpful piece of the pie, and might even help that entrepreneur get some sleep.

Visit the NYC Business Solutions website for more information on how we can help you access financing - with crowdfunding, traditional lenders, or alternative lenders. You can also register for our upcoming (2/9/2012) course on Crowdfunding.

Michelle Bhattacharyya is the Director of the NYC Business Solutions Centers in Upper Manhattan and Washington Heights. If you have a question or comment for Michelle, please drop her a note in the comment section below. And, please share her blog entry with your colleagues on Facebook and Twitter.