Tag Archives: small businesses

78464706

Survey: Businesses Not Utilizing Tax Technologies

GoDaddy, the world’s largest technology provider dedicated to small businesses, announced findings from a survey of 600 small business owners. The survey explored how small businesses manage their finances throughout the year and the impact that has during tax season. The survey reveals that more than half of small businesses surveyed still use manual processes – typically a spreadsheet or pen and paper – to track finances. In addition, almost 40 percent of these businesses are spending multiple days on tax preparation.

While small business owners are known for being optimistic, confident and passionate about their trade, business functions such as bookkeeping and taxes are seen as burdensome. In fact, 40 percent of small business owners say bookkeeping and taxes are the most unpleasant part of owning a small business, right up there with going to the dentist and public speaking. Additionally, 40 percent of small business owners are only ‘somewhat confident’ in managing business finances and taxes.

“This April, nearly 23 million small businesses in the U.S. will file a Schedule C form, and yet there are still some small business owners who have no idea how much money they owe and have not set aside money for taxes,” said GoDaddy Vice President of Applications Steven Aldrich. “At GoDaddy, we understand how painful tax time is and how critical it is for small business owners to report tax information accurately. We’re committed to empowering the small business owner by providing them with products like GoDaddy Online Bookkeeping, which is both very easy to use and dramatically simplifies tax preparation.”

The survey also indicated that using more sophisticated tools, such as software or online services, to manage finances, seems to give businesses insight into how their business is performing and how to accurately project growth and financial results. For example, a full 60 percent of small businesses using software or online services to manage finances performed as they expected to perform financially, whereas just 46 percent of small businesses that manage finances manually performed as expected.

The survey results also reveal that:

  • Almost half (46 percent) of small business owners reported they do not work with an accountant.
  • Of those small business owners who do work with an accountant, 47 percent see their accountant once a year at tax time or only when they have a question or need help.
  • In the last 12 months, nearly a quarter of small business owners said they had lost track of whether a customer has paid them or not, or could see it happening in the future.
  • 32 percent of small business owners do not set aside money throughout the year to pay income taxes.
  • 12 percent of small business owners have no idea how much they will owe in income taxes, while 74 percent reported that they usually know the “ballpark” of what they owe, while just 15 percent know exactly how much they owe.

GoDaddy Online Bookkeeping empowers small businesses, helping them monitor business metrics easily and enabling them to be more prepared and organized at tax time. The tool helps small business owners manage taxes, create, send and track estimates and invoices, track sales and expenses, as well as profits and loss, and categorizes transactions into IRS categories, among other capabilities.

“As entrepreneurs, small business owners are responsible for a number of business tasks, including marketing, inventory management, accounts payable, accounts receivable, payroll – all of these different areas that large companies have dedicated departments and specialists for,” said Danni Ackerman, founder of The Danni App. “It is imperative that we find tools to help us become experts in these areas. GoDaddy Online Bookkeeping has been an absolute godsend for me, helping me stay organized and manage my business’ finances effectively and efficiently.”

To learn about GoDaddy Online Bookkeeping, visit: http://x.co/GoDaddyOB.

wildfire

First Fidelity offers tips to prepare for fire, drought season

As the fire and drought season in Arizona continues, the risk for businesses and the importance to be prepared is higher than ever. Recent research shows that small businesses are particularly vulnerable with only 38 percent having an emergency or disaster preparedness plan, 84 percent don’t have natural disaster insurance and 71 percent don’t have a back-up generator in case of power outage.

“Fires and droughts can catch any business off guard,” said Kevin Sellers, executive vice president for First Fidelity Bank in Arizona. “Having a business continuity plan is a smart first step when preparing for the worst.”

First Fidelity Bank shares advice with other business owners about ways business plans can be set up or improved during natural disasters.

Have a crisis plan. Oftentimes, natural disasters like droughts and fires cloud good judgment, especially when an entire business is at stake. However, it is important to have a plan in place so next steps can be smooth and well planned out. Anytime your business may be impacted, you can easily refer to your plan and make adjustments accordingly. For example, if your business is in immediate danger, refer to your plan for key messages outlined that you can share with employees and the public if needed. It is also beneficial to have next steps planned out when dealing with insurance companies. If your business is severely damaged, you can begin working with your insurance company to make arrangements to rebuild.

Have a communication plan. A key part of your crisis plan is communication. Develop key messages you would share with your employees and fellow staff members. Also, establish a communication pyramid among leadership to ensure effective and coordinated communication. Use forms of social media like Facebook and Twitter to give updates to employees and customers since phone lines can be affected. Be honest and upfront about the state of your business and provide information that will help them know what to expect as your company regroups after a disaster. Make sure to notify your company’s bank and let them know of your situation. Current business, like loan payments, may be able to be put on hold if necessary. Also, talk to your bank to learn about loan options in case your business needs repairs after a natural disaster.

Use additional servers to back up data. During a natural disaster, it is not an ideal time to worry about information being lost. Plan ahead and store sensitive information in more than one place. Electronics and servers can be severely damaged so be sure to have all data stored on an additional server. Sensitive company data on the loose puts a company at risk for fraudulent activity. Looters can easily gain access to company credit card numbers, social security numbers and other highly sensitive data. Use flash drives to keep track of this type of data. These can be easily transported and kept safe during natural disasters.

Have a plan for payroll. In case a natural disaster interferes with the payroll process, have a plan in place to continue paying employees. Since each company has a different payroll system, a back-up plan will be a case-by-case basis. Options include working with insurance to collect the money for payroll, fronting the money to employees or cutting paper checks if the direct deposit system is down. The Society for Human Resource Management offers helpful information to make sure employers know the guidelines for paying employees during natural disasters. Visit www.SHRM.org to learn more about payment requirements for various types of employees. Be sure to contact your company’s bank and notify them of a change in payroll. Most banks will keep an extra close watch on fraudulent activity so any significant change in payment methods could send up a red flag and complicate the process.

tracking

Are Businesses Crossing Lines by Tracking Employees?

Nearly 10 years after real-time package- and people-tracking went viral with the advent of GPS-enabled cell phones, small businesses face two big concerns.

“One is expense. Small businesses, especially those still recovering from the worst recession in modern history, can’t always afford to provide their employees with GPS-equipped smart phones,” notes location-based services specialist George Karonis, founder and CEO of LiveViewGPS, Inc., provider of Mobile Phone Locate tracking service,  (www.mobilephonelocate.com).

“The second issue is privacy. People generally don’t want their employer to be a ‘big brother’ boss who can track their every move. It’s not because they’re doing something they shouldn’t, but because it invades their space, and the information could be misinterpreted or misused.”

But employee tracking has plenty of obvious benefits to small business owners:

• Provide baseline information. It gives businesses solid data to analyze for initiatives such as improving efficiency. Businesses with lots of workers in the field making deliveries or service calls can optimize routes and schedules.

• Improve customer service and satisfaction. Tracking helps a business tell people waiting somewhere for a delivery or service exactly where their package or service-person is and how long the wait will be.

• Improve response times. On-site coordinators can re-route workers in the field to respond to unscheduled calls in the most efficient way possible.

• Reduce costs. The greater efficiency provided by tracking helps lower costs by reducing both downtime and overtime.

So how can businesses circumvent affordability and employee privacy concerns?

One way is to accomplish both is to use a service that doesn’t involve extra equipment, including software, or a contract, Karonis says.

“If you’re not loading apps or software onto someone’s personal phone, it’s less intrusive for the employee and he or she will be more willing to allow use of their own phone. There’s also no added drain on the battery, because there’s no app constantly running in the background, and no hitch-hiking on their data plan or incurring a data charge,” he says.

“If you make it non-intrusive employees won’t tend to feel that you’re invading their privacy.”

Using a service that charges per location, with no requirement for a time-specific contract, is also more cost-efficient for the business, Karonis says.
“For the small business that’s merely seeking to improve efficiency and customer service, constant tracking isn’t necessary. That’s more appropriate in a situation where employers have large number of people constantly in the field, for instance, UPS. Or, employers who feel the need to monitor unproductive employees,” he says.

There’s a growing backlash as the public is subjected to more and more stalking – from cameras mounted at traffic lights to social networking sites recording shopping habits and topics of conversation, Karonis notes.

“We’ve reached a crossroads where we need to find a balance between surveillance that provides legitimate business advantages and surveillance that invades people’s privacy,” he says.

“It really is possible to strike that balance and, in a small business that thrives on trust, mutual respect and fully invested employees, it’s essential.”

taxes

Tax reform aims to help small businesses

During the State of the Union address, President Obama said that tax reform is a key issue for small businesses today. Specifically, the president stressed that many small businesses are overwhelmed with administrative tasks associated with tax filing and deserve the opportunity to focus on strategic areas of their business that could help them grow and hire more workers.

“For many businesses, the complexity of the tax code is challenging,” said Ron Butler, partner at Ernst & Young in Phoenix. “Small businesses and entrepreneurs incur significant costs to interpret and apply federal tax rules and regulations and to produce the required information necessary to prepare accurate returns. They would benefit from a system that modernizes and simplifies their tax compliance and reporting obligations.”

According to the National Federation of Independent Business, tax compliance costs are 65 percent higher for small businesses than for big businesses, costing small business owners $18 billion to $19 billion per year.  In addition, nearly nine out of ten small businesses rely on outside tax preparers. With about half of the private sector workforce employed by a small business — a total of nearly 60 million Americans — these costs, along with tax rates as high as 44.6 percent, carry a heavy burden for small businesses.

“Record keeping and record retention are probably the most overwhelming administrative tasks (for small businesses),” said Donna Witherwax, tax partner at Grant Thornton in Phoenix. “Not only do they contribute to unproductive costs, they also divert attention from the more important tasks a small business owner should focus on. Small businesses often lack the resources to fully understand how the tax law affects their business.”

To put the need for reform succinctly: “Tax reform presents an opportunity to achieve tax code simplification and improve our nation’s present fiscal path,” Butler said.

To help put us on a better path, the House Ways and Means Committee released a set of proposals in March that are aimed at reforming tax laws for small businesses. As part of a broader, comprehensive tax reform package that would significantly lower rates for small businesses, the proposal would reform and try to simplify tax compliance for small businesses and provide certainty with respect to the ability of small businesses to recover certain costs immediately. These include widely supported reforms such as permanent Section 179 expensing and expansion of the “cash accounting” method, amongst other provisions.

“The most important thing for lawmakers to focus on in this tax reform is re-establishing rate equality,” Witherwax said. “That is, making sure that the current tax rate applied to income earned by an active small business that is organized as a partnership, S corporation or sole proprietorship is no higher than the rate applied to income earned by a normal C corporation. Normally, I would say they should focus on making it easier for small businesses to comply by providing simple and direct rules and additional safe harbors, as well as focusing on minimizing the record keeping burden. But this is not a normal tax reform process.”

Witherwax said the tax reform that is currently being discussed in Washington began as a quest to reduce the statutory corporate tax rate in order to address the disadvantage U.S multinationals face in competing with the multinationals of other nations as a result of the U.S. rate.

“There are good reasons to do that,” she said. “But reducing corporate rates alone would disadvantage those active small businesses that operate as partnerships, S corporations or sole proprietorships. Leaving their rate where it is while reducing the rate of their larger C corporation competitors would put these small businesses at a competitive disadvantage. A disadvantage that would be exacerbated  if the revenue lost by reducing the corporate rate is offset by changes that eliminate some of the business tax benefits that small businesses rely on. For these reasons, in this tax reform, rate equality is the most important thing.”

The good new is that the discussion draft released by the House Ways and Means Committee is designed to provide more uniform tax treatment for pass-through businesses such as sole proprietorships, partnerships and S corporations. The draft also includes proposals that would spur investment in equipment needed to grow business operations by providing permanent expensing of investments and property; would simplify tax and accounting practices by expanding the use of the simpler “cash accounting” method to businesses with gross receipts of $10 million or less; would provide relief for start-up and organizational costs by establishing a unified deduction for these expenses; and make tax compliance easier for partners and S corporation shareholders by reordering and simplifying the due dates of tax returns for partners and S corporations.

To create reform that’s going to work, experts say, it’s vital that they solicit first-hand feedback.

“Lawmakers should ask small business owners and their tax advisors what changes they want,” said John Hanson, a tax attorney with Sacks Tierney in Phoenix. “ They are best suited to propose worthwhile changes because they are dealing with these issues daily.”

Dave Camp, R-Mich., chairman of the tax-writing House Ways and Means Committee that released the set of proposals aimed at reforming the tax laws for small businesses, said he encourages small business owners and stakeholders to review the discussion draft and to share feedback with their lawmakers and the Ways and Means Committee.

“More Americans get their paycheck from small businesses than any other type of business or government,” Camp said in a statement. “If we really want to strengthen our economy and put more money in the pockets of American workers, we must fix the Tax Code and how it treats small businesses. In addition to all the complexity these Main Street businesses face, Washington currently taxes them at top rates nearly 10 percentage points higher than their corporate counterparts. That’s simply unfair to small businesses … These are the businesses we see every day, where so many of our friends, family and neighbors work … They need and deserve a Tax Code that works for them.”

THE IMPACT OF REFORM

Ron Butler, partner, Ernst & Young: “A broader, comprehensive tax reform package that lowers rates and simplifies tax rules for individuals, small businesses and corporations could be a driving force for economic growth and job creation in the American economy.”
John Hanson, tax attorney, Sacks Tierney: “Tax reform that reduces the compliance burden on small business owners will allow them to invest more resources in their businesses, become more profitable and create more jobs.”
Donna Witherwax, tax partner, Grant Thornton: “It depends on the tax reform we get.  If business rate equivalency can be restored, and a more efficient tax code adopted, small business could be a winner.”

Curtis A. Hildt, tax managing partner, Deloitte Tax LLP: “Small businesses will be able to focus their efforts toward business operations instead of weaving their way through a complex tax system.”

Infusionsoft

Wist signs contract with Infusionsoft

Wist Office Products, the longtime Tempe-based office supplier ranked “Best Office Supply Company” in the state for seven years and counting, today announced yet another victory in a year that’s already proven to be a standout for the locally-owned and operated retailer.

Infusionsoft, designer of the only all-in-one sales and marketing software for small businesses and a six-time Inc. 500/5000 company, has signed on with Wist Office Products, Arizona’s largest independent business product supplier, to exclusively provide all of the company’s office supply and business product needs. The announcement was made shortly after Wist Office Products secured a prestigious ILoA Award from AZ Business Magazine, recognizing local businesses for their contributions in five key industries – alternative energy, distribution and logistics, healthcare, hospitality, and retail.

“We’re thrilled to make Infusionsoft an integral part of the Wist Office Products team,” said Ian Wist, co-owner and general manager at Wist Office Products. “We’re longtime admirers of how they operate their business, and their passion and dedication to aiding small business growth. All you need to do is look at their own history and growth to see why an Infusionsoft/Wist partnership is an ideal fit for both sides.”

“The real winners in this deal are the people of Arizona,” explains Kimber Lanning, executive director of Local First Arizona. “Most folks don’t realize that having business to business support between Arizona companies keeps up to four times more money recirculating in the local economy, and that means more tax revenue for parks, libraries and fire departments.”

Headquartered in Chandler, Infusionsoft’s contract with Wist indicates yet another way the company helps further the goals and objectives of small businesses, opting to sign on with their Tempe neighbor as opposed to forging a contract with a larger, national conglomerate.

“We love Arizona and the many businesses headquartered here,” said Eric Keosky-Smith, Infusionsoft regional development director for Arizona. “A partnership with a local company like Wist makes clear sense to us because it keeps more money in Arizona, which ultimately contributes to our company’s purpose – to help small businesses succeed. We hope to lead by example and show others that partnering locally can be an excellent option that isn’t just self-fulfilling but also beneficial to everyone in the local community.”

With a catalog of more than 50,000 office supply products and nearly 60 successful years in the industry, Wist Office Products has managed to successfully avoid the economic collapse that so many local companies have fallen prey to since the Recession began.

“It’s partnerships like this one that have kept business thriving over the years,” Wist said. “We’ve had a stellar almost-sixty years in business, and with the continued support of great companies like Infusionsoft, we look ahead to another sixty more.”

technology

Infusionsoft’s CTO Named IT Leader of the Year

Infusionsoft, creator of the all-in-one sales and marketing software for small businesses, announced that Marc Chesley has been named 2013 IT Leader of the Year by the Arizona Society for Information Management (SIM). Chesley has won the award for driving innovation and execution excellence, including company, community and staff development, through information technology. The SIM AZ chapter is the premier local network for IT thought leaders who share experiences and apply rich intellectual capital, while also exploring the future of IT.

“I’m honored to receive such a prestigious award from an organization that is led by the state’s most innovative IT leaders,” said Chesley. “There are a lot of other IT professionals who also deserve recognition for their leadership and innovation in the Arizona tech community. I’m proud to be part of a growing hub for IT.”

Chesley is a cloud computing and agile development leader, a certified SCRUM master and SCRUM product owner. Chesley is helping propel the company to the billion-dollar mark, making Infusionsoft one of the most successful technology companies in Arizona’s history.

“Marc was an obvious choice for the inaugural IT Leader of the Year Award,” said Deborah DeCorrevont, president of the Arizona Chapter of SIM. “His leadership of Infusionsoft’s engineering, systems administration and deliverability teams has helped the company innovate at a very high level. Infusionsoft customers are the beneficiaries of software that is expertly developed and actually does what the company says it will. Marc exemplifies the leadership qualities we encourage for all of our members.”

Chesley will be presented with the IT Leader of the Year Award on March 20, 2013 at Infusionsoft’s corporate headquarters located at 1260 S. Spectrum Blvd. in Chandler.

97083062

7 Tips for Choosing a Dental Plan for Small Businesses

Graduating students and alumni rate dental coverage among the top five most important benefits — medical insurance, yearly salary increase, 401(k) retirement plan, dental insurance and life insurance. In an increasingly competitive environment, a strong benefits package can play a key role in attracting and retaining top talent. Dental coverage has an important position in rounding out that package.

Unfortunately, many small business owners are unsure what to look for when choosing a dental benefits plan. In fact, 90 percent of benefits decision-makers rely on a broker or consultant to help them choose the best plan and carrier for their employees.

Here are seven tips from Delta Dental of Arizona to help you choose the best dental insurance plan for your company:

1. Understand your employees’ needs
Understanding your organization’s oral health needs is the first step in evaluating your dental benefits options. Different demographics face different oral health challenges. For example:
• Employees ages 20-39: This generation generally faces fewer oral health challenges. They benefit most from prevention and find value in a plan that covers basic cleanings and checkups. Members of this age group are more likely to be starting families.
• Employees ages 40-59: Members of this group often require restorative procedures. As their oral health needs change with age, they tend to seek ways to manage their health and wellness. They value a benefits carrier that provides access to expert resources and offers them choices to help confront oral health challenges.
• Employees ages 60+: Employees nearing retirement are more likely to face chronic conditions. They value a plan that helps them manage the expenses associated with more complicated procedures.

2. Find out how big the dentist network is
Employees are likely to be more satisfied with their dental plan when they can answer “yes” to this question: “Is my dentist in the network?” Having more in-network dentists to choose from improves network utilization rates simply because more employees are visiting an in-network dentist. This means more enrollees are enjoying protection from balance billing and saving the group money on claims – a satisfying result for the employer and employees.

3. Focus on preventative care
A strong dental insurance company will help employees manage their oral health by encouraging preventive care. This reduces long-term costs on the dental side and could also have a significant long-term impact on overall health and health care costs.

4. Ensure benefits information is available online
Progressive dental carriers’ online capabilities enhance customer service, provide flexibility and transparency and improve operating efficiency, from billing and paying claims to enrollment and enrollee communication.

5. Ask about customer satisfaction levels
An employer and its employees must have confidence that they’ll be taken care of after signing on with a carrier. Some carriers even include guarantees with financial penalties should they fail to meet agreed-upon service standards.

6. Consider adding enhanced benefits coverage
The U.S. Surgeon General’s office has noted correlations between periodontal disease and health care costs for certain medical conditions, and studies examining the effects of oral health on systemic medical conditions continue to point out even more potential connections.

For little or no increase in premium, many carriers can add enhanced benefits for individuals with medical conditions that may benefit from additional oral health care. This could include pregnant women and/or persons with diabetes, cardiac conditions, suppressed immune systems, risk of oral cancer and other systemic diseases.

7. Be picky
Medical and dental benefits operate under very different models. While the former focuses more on treatment, the latter concentrates primarily on prevention. Furthermore, building and maintaining an effective dentist network is much different than building a network of medical care providers.

All things equal, an employer should choose a dental carrier that’s an expert at providing and delivering effective, high-quality dental benefits. A carrier committed to providing such dental benefits will be intimately familiar with the latest dental research, will have aggregated data on dental utilization and dentist reimbursements, and will be able use that data to create better products and control costs.

Regardless of the dental benefits carrier they choose, employers should be commended for the decision to provide dental benefits to their employees. People with dental benefits exhibit more healthy behaviors and better oral health habits – including brushing, flossing and visiting the dentist more regularly – and are less likely to smoke.

David Hurley is the vice president of sales for Delta Dental of Arizona, the leading dental benefits provider in Arizona, serving more than 753,000 enrollees and more than 3,100 contracted dentists across the state.

small business - ASBA advocacy

ASBA Shapes Public Policy For Arizona Small Businesses

The Arizona Small Business Association (ASBA), the largest trade association in Arizona representing over 11,000 member businesses, has ramped up its public policy focus over the past few years at the state and federal level to advocate for small businesses throughout Arizona. After surveying its members, ASBA determined the following five areas as its 2012 Legislative Priorities: 1) Taxation, 2) Regulation, 3) Economic Development, 4) Health Care and 5) Education.

“We are committed to stronger representation and increased advocacy for small businesses at the state and federal level to make Arizona more business friendly,” states ASBA CEO Rick Murray. “And because of our size, ASBA has the clout to shape public policy.”

This year, ASBA had 13 priority bills to help support small businesses, six of which were passed and signed by Gov. Jan Brewer. Among them:

HB 2123 “Transaction Privilege Tax Reform Committee”

Establishes a 13-member Committee to study, make recommendations and propose legislation to revise Arizona’s tax code to reflect the 21st Century economy. This includes both individual and corporate income tax, as well as transaction privilege tax, or sales tax.

HB2159 “Unemployment Insurance; Independent Contractors; Appeals”

Clarifies language on unemployment insurance and essentially increases the amount of time an employer has to file various appeals on unemployment insurance claims.

HB2272 “Public Records Exemption, Research Data”

The exemption from public records laws for certain state university records is expanded to include information or intellectual property that is developed by persons employed by a university. This will protect the private sector’s intellectual property and encourage more research and clinical studies conducted in Arizona.

“Public policy is a priority of ASBA,” says Jerry Bustamante, senior vice president of public policy for ASBA. “We had a very productive legislative session this year with many wins that Arizona businesses are going to benefit from.” Bustamante adds that, while ASBA advocates for small businesses at the state and federal level, it also works with local chambers of commerce throughout Arizona on legislative issues and encourages them to take the lead and be the voice of business in their communities and city hall.

ASBA has a Public Policy Committee of dedicated volunteer members and staff that are charged with conducting research, surveying the membership, developing its legislative priorities, tracking bills and taking action to influence the passage or defeat of bills. In addition, Murray and Bustamante are Lobbyists and the organization maintains a Lobbyist dedicated to attending each day of the legislative session.

For more information on ASBA’s role in public policy and its 2012 legislative priorities and how it helps small businesses, visit asba.com/legislativesummary.

Small Businesses

How Small Businesses Are (Mis)Using Social Media

It’s no mystery that social media has become an important tool in marketing for small businesses. In fact, building brand awareness on Facebook has become the most popular, with nine million small businesses utilizing the platform today. However, many of these businesses aren’t taking full advantage of its potential.

This infographic, from Intuit, illustrates how small businesses can better leverage their social media efforts to create new opportunities and reach more customers.


Does your company use Facebook to its full potential?

How small businesses use social media - infographic
via: Intuit Websites


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Infographic Credits, courtesy of Intuit:

Source: Intuit
Designed by: Column Five Media

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Selling the Company

Planning Ahead: Steps To Selling The Company

With the new year, entrepreneurs and business owners are looking ahead and putting plans in place for the coming year and beyond. For most the focus is on increasing sales and revenues to grow the business, for some it is looking to take things in a new direction, and for others it may be stepping away from the business entirely and selling the company. Regardless of the objective, planning is essential.

If a business owner is interested in actually selling the company, there are a number of key steps that need to be taken to help ensure success.

Take your time when selling the company

Planning for the sale of a business should begin at least one year in advance. It can take this long to get financial information and documentation pulled together to allow the owner to find the best buyer for the business, that is a match financially and has the right professional experience to step in and take over. When a buyer is found and the deal is finalized, it is also important to allow time for the transition.

Find the right people for the job

To find a buyer, you may want to consider consulting a reputable business broker. A broker can help navigate the steps of preparing and selling the company. Also, tap into your connections to ask around and get advice from trusted sources such as an accountant, banker and attorney. You may be an expert in your industry, but these professionals have handled transactions like this numerous times and often know what to look for. Consider asking people in your business network for referrals and while brokers can be helpful, avoid professional brokers that ask for large upfront deposits.

Succession planning

When selling the company, the business owner may stay on for a period of time as a consultant or contractor. Either way, at some point they will be leaving, and it is crucial to put together a management team that can run the company without the owner. This process can also take time.

Do not assume that relying on longtime employees and managers is enough. In some cases, a manager may have been on staff a long time, but they are still not as involved in the entire business process as the owner and may not know a great deal of the business operations. Planning ahead will eliminate the need for the seller to stay on long after the business is sold and allow time to train and promote someone from within or to hire a qualified person from outside the business.

Document an operations manual

In addition to developing the right management team, developing instructional materials and documenting information on the “how to” for the operation is vital to a successful transition. The creation of a company manual should include everything from detailed major operation information and key vendors to an organizational chart of employees and the small day-to-day tasks. This gives a real value for the company by providing the potential buyer with a base for operating the business.

Make your company desirable to buyers

First impressions are important. Think of how you would react to your business if it was your first time walking in or seeing the behind-the-scenes operations. Making necessary upgrades, documenting procedures and listing business statistics, such as operation costs, yearly sales increases and customer growth, gives a potential buyer the information they need upfront.

Transferring the products

If the company sells a service, most contracts are month-to-month so customers can leave anytime. This means the buyer will devalue the cash flow stream. If you can patent or trademark services and products, this will add value to the company, allowing the seller to command a higher price. If possible, do not take a seller carry-back note. This means the sales price will be paid over a time period and may be based on the future profitability of the company. Less cash upfront is better than more cash over a longer and uncertain period of time.

When selling, it is important to be realistic. According to data from BizBuySell.com, more small businesses were sold in 2010 than 2009, but were sold for less.

Whether it is a business-to-consumer or business-to-business model you are trying to sell, planning ahead is vital. Reviewing the business structure, its operations and securing a reputable broker positions the seller best. In other words, planning to sell the company you have spent countless hours building will ultimately make it more desirable to buyers.

The only question now is, once the business is sold what will you do next?

For more information, visit fswfunding.com.

 

Disaster preparedness for your business

Disaster Preparedness: Is Your Business Ready?

Cindy Bates, vice president of Microsoft’s US SMB Organization, gives tips on how to achieve disaster preparedness for your business.

For many businesses, disaster preparedness plans entail conducting semi-regular fire drills and making sure employees know where emergency exits are located. Unfortunately, these measures alone don’t do nearly enough to help businesses withstand the range of disasters, both physical and virtual, that they could face.

It’s easy to set aside the task of developing a disaster preparedness plan in favor of attending to more immediate business demands, especially given that Arizona isn’t a hotbed for major natural disasters. Yet, most disasters are entirely unexpected, can be localized to just one company or a handful of businesses and can be difficult if not impossible to recover from. In fact, the U.S. Department of Labor estimates more than 40 percent of businesses never reopen following a disaster and, of the remaining companies, at least 25 percent will close in two years.

Acheiving Disaster Preparedness For Your Business

Small and medium-sized businesses (SMBs) may have the hardest time recovering from disaster, since they lack many resources that keep larger companies afloat during disasters, such as a robust technology infrastructure, satellite offices and larger workforces. Fortunately, there still are many cost-effective ways SMBs can aid in disaster preparedness. The following measures are fairly simple to implement and make it a great deal easier for SMBs to endure or even prevent the unexpected:

Maintain updated technology – By simply responding promptly to technology update notices, businesses can prevent a host of virtual disasters from ever occurring in the first place. Running updated technology safeguards businesses against many of the latest security hazards and is essential to the overall health of the IT infrastructure.

Back-up data – Many disasters, whether physical or virtual, wipe out critical information stored on  business computers, so it’s important to keep all essential data backed up in some way. Replicating hard drives is one option, though this approach requires remembering to do so weekly and also removing the disk drive from the premises each night. Businesses also can opt for online backup solutions that safeguard data and make it easily accessible from remote locations. If workers rely heavily on mobile devices, look for online backup solutions for data storage on those devices as well.

Invest in cloud-based software – Cloud-based software solutions have become increasingly popular among SMBs, largely because they offer enterprise-grade capabilities at an affordable price, as well as enable employees to securely access data and programs from nearly any location and device, a capability that becomes particularly useful during disaster. Having cloud-based software in place supports business continuity when disaster strikes, providing more flexibility in terms of when and where business gets conducted.

Develop a communications plan – Planning ahead for how communications related to a disaster will be managed helps businesses act swiftly and appropriately should a disaster occur. Determine who will communicate pertinent information to employees and to such external audiences as clients, customers and partners. Also, decide which methods of communication will be used, taking into account such properties as company websites, blogs and social media platforms.

To better assess how prepared your business is for disaster, click here to access a free quiz that will help you find out just how prepared you are, or aren’t, for possible disaster. The quiz is part of Microsoft’s free, downloadable e-guide on disaster preparedness, available here.

Many Arizona Small Businesses And Banks Say A Federal Loan Program Isn’t Needed - AZ Business Magazine Nov/Dec 2010

Many Arizona Small Businesses And Banks Say A Federal Loan Program Isn’t Needed

President Barack Obama has signed a bill that aims to increase small business lending. But it’s not exactly popular among Arizona’s small companies and community banks. They question whether a multibillion-dollar loan fund created by the legislation will achieve its goal.

The Small Business Jobs and Credit Act of 2010 will establish a $30 billion Small Business Lending Fund within the U.S. Treasury. The Treasury will use that money to purchase preferred shares in small- to medium-size banks that voluntarily participate in the program, injecting new capital that the banks would be encouraged to lend to small businesses. The more loans the banks make, the lower the dividend rate they pay the Treasury.

“As a small business owner, I am allergic to government intervention,” says Charlie O’Dowd, president of Westcap Solar, a Tucson company that sells and installs solar photovoltaic and solar hot-water systems. “I don’t think that this legislation is going to be any more effective than the TARP (Troubled Asset Relief Program) legislation. In this economy, it’s not that there isn’t money to be borrowed. It’s qualifying for the loan that’s the problem.”

The new law also gives John P. Lewis a bad taste in his mouth. Lewis is president and CEO of Southern Arizona Community Bank in Tucson, and a member of the FDIC’s Advisory Committee On Community Banking.

“Last January, the committee had a robust discussion (on the legislation),” Lewis says. “The committee said, ‘We don’t want to be a part of this.’ Community banks don’t need the additional capital. I have more money than I know what to do with. I need qualified borrowers.”

O’Dowd and Lewis describe a situation that is frustrating for both and that neither believes government policy will resolve. O’Dowd says small businesses’ sales are slow, impacting their ability to qualify for loans. Lewis says his loan demand is flat because there are fewer qualified borrowers.

The Arizona Small Business Association points to a wary small business community that’s in no mood to take on more debt. Earlier in the recession, small businesses tried in vain to obtain bank loans, but now they are in survival mode, says Donna Davis, the association’s CEO.

“Bank loans are not at the top of their list now,” Davis says. “Some businesses have lending fatigue. They just gave up (trying to get loans). Now they are focused on lack of sales. If sales don’t pick up, if work doesn’t pick up, they won’t seek credit. If they can boost sales and profits, then they can justify hiring and expanding.”

One outside observer sees a triumvirate of doubt that the legislation will not mitigate. Dennis Hoffman, professor of economics at Arizona State University’s W. P. Carey School of Business, says this recession has caused consumers, businesses and banks to lose their confidence. Lacking the good credit risk they saw five years ago, banks have “pulled in their oars,” Hoffman says. Creditworthy businesses fret so much over the economy, they don’t even apply for loans. Recession-scarred consumers remain stingy.

“We need to climb this wall of worry to get out of this morass,” Hoffman says. “This is a market-based, private-sector issue that will have to work itself out.”

Gail Grace, president and CEO of Sunrise Bank of Arizona headquartered in Phoenix, doesn’t sense much support for the legislation among Arizona’s banks, and wonders how many community banks would be able to participate.

“Community banks in Arizona are stressed and many may not even qualify for this program,” Grace says. “You will still have to have a fairly healthy bank to qualify for this.”

Not everyone has a dim view of the law. Robert Blaney, Arizona’s Small Business Administration district director, notes that the law will increase the SBA’s loan guarantee from 75 percent to 90 percent, easing banks’ risk on those loans. The law also will lower fees and raise the SBA’s maximum loan amount from $2 million to $5 million. There are thousands of small business owners nationwide that were waiting for the lending bill to become law, Blaney says.

One of those is Benefits By Design, a Tempe company that sets up health benefit plans for small businesses. The company’s president, Kristine Kassel, says there is a need for loans and it would be helpful if just two community banks expanded their small business lending. She adds that any amount of new credit that can be extended to small businesses is a good thing.

Banks interested in acquiring low-cost capital might be attracted to the Treasury fund and they might be enticed by the built-in incentives to direct new-found capital into small business lending, says Dan Stewart, Arizona market president for Mutual of Omaha.

But then he echoes what others say: “The (law) doesn’t encourage banks to take on more credit risk, so qualified borrowers are the key.”

    By the Numbers
    The Small Business Jobs and Credit Act of 2010



  • Establishes a $30 billion Small Business Lending Fund within the U.S. Treasury
  • Treasury will use money to purchase preferred shares in small- to medium-size banks that voluntarily participate in the program
  • SBA’s loan guarantee would increase from 75 percent to 90 percent
  • The SBA’s maximum loan amount would increase from $2 million to $5 million

Arizona Business Magazine Nov/Dec 2010

Health Care Reform in Arizona - AZ Business Magazine Nov/Dec 2010

Business And Community Leaders Are Trying To Figure Out What Health Care Reform Will Mean In Arizona

For government and business, providers and patients, the U.S. health care reform legislation promises a new world of costs and care.

Most individuals without insurance will be able to get it. Those who have insurance already probably will have to pay more for it. Hospitals, doctors and others in the front lines of health care will begin to change long-established ways of doing business. State governments and many businesses, already battered by recession, will face new costs and possibly some benefits.

But beyond these generalizations, little is certain about what health care reform will mean in Arizona and across the country. The bill is vague in many areas and leaves important details of implementation to be determined by federal regulators and other officials in the weeks and months ahead.

“Quite frankly, we won’t know the financial impacts until we move through the process and see what the federal government and insurance companies do,” says Donna Davis, chief executive officer of the Arizona Small Business Association (ASBA).

Barry Broome, president and chief executive officer of the Greater Phoenix Economic Council (GPEC), says it is too early know what the bill will mean.

“It sounds very good to be able to cover the uninsured, but what the costs are and how they are going to be distributed are still not clear,” he says.

Marjorie Baldwin, director of the School of Health Management and Policy and assistant dean at Arizona State University’s W. P. Carey School of Business, says it is important to note that the law’s primary purpose is to cover the uninsured.

“This bill is about access,” Baldwin says. “It’s designed to cover the uninsured. There is much less in it about quality of care and little about cost controls.”

On what the price tag for health care reform will be, Baldwin says, “The one safe prediction is that it is going to cost much more than anticipated.”

Hospitals and doctors
Whether the health care overhaul is ultimately deemed a success will be determined to a large extent by what happens inside the nation’s hospitals, clinics and doctors’ offices.

Peter Pavarini, a health care lawyer for Squire, Sanders and Dempsey and an adviser to health care organizations, believes hospitals are actually well-positioned to adapt to the new law.

“Hospitals have been anticipating something happening for some time,” Pavarini says. “Hospitals have the resources to prepare better than some of the other players in the health care system.”

Several provisions in the law are expected to lead to a dramatic shift in the way hospitals are paid by insurance. Under the existing system, providers receive set rates for specific medical procedures. The new law moves toward a system in which hospitals receive a set amount for treating an overall condition or a so-called “bundled payment.” This shift is expected to require more detailed treatment plans, coordinated care and closer cooperation among hospitals and physicians.

“With the bundled payments, you have to have a more integrated approach and an approach that aligns physicians and hospitals,” says Suzanne Pfister, vice president of external affairs at St. Joseph’s Hospital and Medical Center in Phoenix.

The hospital already has been moving in this direction, according to Pfister. St. Joseph’s has forged a series of partnerships with area health care organizations, including outpatient and short-stay providers United Surgical Partners and SimonMed Imaging
.
“We are continuing to look at moving from acute care to a continuum of care,” Pfister says.

Pavarini believes the new payment systems for Medicaid and Medicare will bring big changes to care at hospitals. When the system is in place, hospitals will get a set payment for delivering all of the care a patient receives from 72 hours before admission to 30 days after discharge, he notes.

“That’s a whole different model from what we have now,” Pavarini says. “This means it’s not good enough just to get the patient in and out of the hospital. It means testing can’t be duplicative. And it means patients better be ready for discharge when they’re released.”

Pavarini says doctors and hospitals will need to cooperate more closely as the law is implemented. He sees hospitals forging formal alliances with physician groups and appointing more practicing physicians to their boards of directors.
A more basic concern for hospitals is how much they will be paid. Because expansion of Medicaid is a key feature of the law, hospitals are concerned about long-term revenue.

“Payments are going to shift more to the level of Medicaid, and Medicaid has not been a particularly good payer,” Pfister says.

Officials at Phoenix-based Banner Health, one of the largest nonprofit health care systems in the country, are still examining the legislation to assess its consequences.

“This reform is primarily about health insurance, not health care reform,” the organization said in a statement. “It will result in expanded AHCCCS (Medicaid) coverage in Arizona and access to insurance, but the need remains to address reducing the cost of health care.”

The bill includes a number of provisions that will increase the role of primary-care physicians. Medicaid fees will go up for primary-care doctors, who also will be eligible for bonuses from Medicare.

St. Joseph’s is concerned about being able to find enough physicians as health care reform is implemented in the coming years, according to Pfister.

“Arizona has fewer physicians per capita than the national average, so we face that already. Arizona does not have enough primary-care physicians and even some specialists,” she says.

The larger hospitals that have formal ties to physicians and other providers probably will fare best under health care reform, according to Pavarini. But he believes smaller, more isolated hospitals will struggle and some will close.

“Arizona has a number of smaller hospitals in less populated areas,” he says. “I think the outlying hospitals in rural communities could have difficulty.”

Businesses
While all businesses will be affected by the health care reform law, some will feel it more than others. Probably least affected will be firms that already provide health insurance now and have a pool of employees large enough to allow the companies to self-insure.

“For most large businesses, fundamentally there’s not a lot of change,” says Keith Maio, president and chief executive officer of National Bank of Arizona. “For us, we’ll have to be a little more paperwork conscious.”

ASU’s Baldwin says the principal effect on large employers will be slightly higher expenses, as they absorb some of the cost of the system’s expanded coverage.

“For larger employers, the law is not going to mean a big difference, but they are going to see their costs go up,” she says.

Smaller businesses though will face new uncertainties, and, for some, significant new costs.

“I would say that there is a cloud of concern generally for small businesses,” says Maio, whose bank has many small business customers. “People who have been through the recession and are still slugging it out have learned to survive. But they still have trouble seeing how they can get back to where they were . That’s why something like the health care bill can have such an impact.”

The law offers a complex mix of incentives and penalties designed to spur employers to offer health insurance. In 2014, employers with 50 or more workers who do not provide coverage will face penalties of $2,000 or $3,000 per employee. Some employers who provide insurance and have fewer than 50 workers will be eligible for tax credits.

“In a sense there is both a carrot and a stick,” says Bradford Kirkman-Liff, professor in the School of Health Management and Policy at W. P Carey. “The idea is to create a very strong incentive to provide insurance.”

The tax credits could offset as much as half of the insurance costs for some employers, Kirkman-Liff notes.

“Arizona has a high number of small employers. Many of them don’t provide health insurance, but some do. This would give them a reason not to drop it,” he says.

The law also instructs states to establish insurance exchanges, where small employers and individuals can purchase policies from insurance companies. The exchanges are designed to bring down the cost of insurance by combining groups of buyers into large pools.

But even with government subsidies and insurance exchanges, some businesses will find the burden too large, according Maio.

“The greatest impact will be on those that employ entry-level employees,” he says. “Arizona has a lot of lower-wage businesses who won’t be able to afford to provide insurance. I think some will opt to pay the fine. Then what have you accomplished?”

Another problem that Maio sees is the 50-employee threshold for the coverage requirement. Employers with fewer than 50 can escape penalties for not providing insurance.

“Have you given them a disincentive to adding people?” he asks.

Davis at ASBA says most business owners are focused on short-term challenges and do not have a clear picture of how the law will affect them.

“For some small businesses who fit the prescribed requirements, it will help offset some of their costs,” Davis says. “For others, it simply won’t.”

Spirit of Enterprise

ASU Honors Small Businesses

Five small businesses were recognized at the 14th annual Spirit of Enterprise Awards, presented by the W.P. Carey School of Business at Arizona State University.

The awards are given out to small businesses that exemplify the best in ethics, energy and excellence in entrepreneurship.

“Finding a niche and starting a business is a daunting task,” says Gary Naumann, director of the Spirit of Enterprise Center W.P. Carey. “Growing and sustaining that business — and coming up with innovations to keep it competitive — is an even greater challenge. The common thread among our 2010 winners is that they all had the tenacity to make the critical adjustments needed to power through to the next level.”

The winners are:

Overcoming Adversity Award: Arizona Air Boutique

The company started as a home-based balloon bouquet business, then diversified its offerings to become one of the largest helium distributors in Phoenix, and one of the largest nonflammable gas distributors in Arizona.

Emerging Entrepreneur Award: China Mist Brands

China Mist is the first tea company to offer fresh-brewed iced green, flavored, Fair Trade, organic and herbal teas to food service companies. A co-founder is working toward a sustainability degree to influence all of the company’s offerings.

Spirit of Enterprise Entrepreneurial Leadership Award: Elontec

Elontec specializes in technology, telecommunications and commercial relocation. It has a 99 percent customer satisfaction rate, extensive community involvement and a track record that includes tripling its gross revenues in one year.

Spirit of Enterprise Survivor/Innovator Award: International Cruise and Excursions

International Cruise and Excursions changed the landscape of the travel industry with its “barter-for-travel” initiative, offering cruises in exchange for timeshares, airline miles, credit card loyalty points and other alternative currencies. It is now among the top five cruise providers in the world.

Gary L. Trujillo Minority Enterprise Award: Maintenance Mart

This is a family-owned janitorial and facility supply service with a heavy emphasis on recycling and the use of environmentally friendly products. The minority-owned business also has a very high employee retention rate and a focus on maintaining long-term customer relationships.

The awards ceremony was held at the Arizona Biltmore Resort and Spa.

Make Larger Loans To Small Businesses - AZ Business Magazine Sept/Oct 2010

Arizona’s Credit Unions Want To Make Larger Loans To Small Businesses

As lending opportunities for small businesses throughout Arizona continue to tighten, legislation has been moving through Congress that would enable Arizona’s credit unions to make more loans to small businesses. The media is filled with reports about how small businesses are having trouble gaining access to affordable credit. Credit unions did not take TARP money during the financial crisis, and they can help small businesses create jobs and jumpstart the economy, all at no cost to the taxpayer. This is inconsistent with additional proposals that would give added TARP money to the for-profit banks in order to stimulate small-business lending.

Many local credit unions stand ready to help. But unlike banks, credit unions are constrained by an arbitrary cap that, under current law, limits the amount of small business loans they can make to 12.25 percent of total assets. The Senate is currently debating legislation introduced in the House, the Small Business Lending Fund Act, and Sen. Mark Udall (D-Colo.) has offered a proposed bipartisan amendment to the bill that would raise the business lending cap on credit unions from 12.25 percent of assets to 27.5 percent.

Upholding credit unions’ history of prudent and responsible lending, the credit union would need to meet certain criteria and be approved by the National Credit Union Administration to lend in excess of the current 12.25 percent cap. A credit union would have to be well capitalized (above 7 percent); at or above 80 percent of the current business lending cap for one year before applying; have five or more years of business-lending experience; have a history of strong underwriting and servicing of business loans; and have strong management, an adequate capacity to lend and policies to manage increased business loans. This amendment also includes provisions that would protect the National Credit Union Share Insurance Fund. The Treasury Department also sent a similar proposal to Congress earlier this year.

If the credit union member business lending cap were raised from 12.25 percent to 27.5 percent of assets, the estimated increase of small business loans would be $10 billion in the first year, leading to the creation of 108,000 new jobs, according to estimates from the Credit Union National Association. More than 1,600 of those jobs would be created here in Arizona. Just as important, this arbitrary lending cap increase would come at no cost to the U.S. taxpayer.

Small business is the cornerstone of our community and the key to increasing jobs and economic recovery. The additional lending authority would enable credit unions to do more of what they do best — make safe-and-sound loans to members. In this case, to members who are looking to start or expand a small business in Arizona.

As member-owned, not-for-profit, cooperative financial institutions, supporting local business is natural, and oftentimes, members are seeking a business loan that is too small for banks. The average size of a credit union small business loan in Arizona is only about $240,000, and Arizona credit unions maintain only about 2.6 percent of the local business lending market share.

A well-run member business lending program has the potential to bring a great amount of success to the community. First and foremost, the member businesses have another lending option, allowing them a chance to succeed with the right loan. However, a member business lending program requires personnel and resources. With a cap that is as low as 12.25 percent, many credit unions find the cap too restrictive to offer business loans.

With more capacity to make small business loans, credit unions throughout Arizona can do more to help spur the creation of new jobs, and help accelerate our nation’s economic recovery.

Arizona Credit Unions
Currently Offering Member Business Loans

  • Arizona Federal
  • Arizona Heritage Credit Union
  • Arizona State Credit Union
  • AEA Federal Credit Union
  • Continental Federal Credit Union
  • Credit Union West
  • Arizona Central Credit Union
  • First Credit Union
  • Tempe School Credit Union
  • Tombstone Federal Credit Union
  • Desert Schools Federal Credit Union
  • Vantage West Credit Union
  • TruWest Credit Union
  • Tucson Federal Credit Union

Austin De Bey also contributed to this article.  He is vice president of governmental affairs for the Arizona Credit Union League & Affiliates, www.azcreditunions.coop.

Arizona Business Magazine Sept/Oct 2010

Arizona Business Magazine's Editor-in-Chief Janet Perez

The Buzz on AZNow.Biz – September 20, 2010

It’s another exciting week at AZNow.Biz. Arizona’s credit unions are asking Congress to allow them to make more loans to more small businesses. This week also marks the debut of our workforce columnist, Marcia Rhodes, from the recruitment firm WorldatWork. Rhodes asks the question, are you a good boss?  Find all this and more at AZNow.Biz.

tax day

Recovery Act Provides New Tax Benefits For Small Businesses

In response to an economic downturn the likes of which has not been seen since the Great Depression, President Barack Obama signed the American Recovery and Reinvestment Act of 2009 (commonly referred to as the Recovery Act) into law on Feb. 17. Intended to serve as a stimulus for the U.S. economy, the measures set forth in the Recovery Act are nominally worth approximately $787 billion.

Of those measures, roughly $288 billion are devoted to federal tax relief, with $51 billion aimed at providing tax benefits for small businesses. While the impact of the Recovery Act on individual taxpayers has been widely publicized, the beneficial tax provisions for small businesses and their owners have been overlooked. However, many of the Recovery Act’s new tax provisions offer significant tax savings opportunities for small businesses. Some of these provisions are highlighted below.

Election for longer net operating loss (NOL) carryback period
Currently, corporate taxpayers are allowed to use a NOL from one tax year to reduce taxable income in past or future tax years. Prior to the Recovery Act, NOLs could be carried back for two tax years and carried forward for 20 tax years. The Recovery Act now permits certain qualified small businesses to elect to increase the NOL carryback period from two years to three, four or five years for NOLs arising in a tax year beginning or ending in 2008.

Because many small businesses were profitable in tax years leading up to the current economic crisis, the extended carryback period provides small businesses with an opportunity to offset prior years’ taxable income with losses incurred in 2008. For purposes of the extended carryback period, qualifying small business are corporations whose average annual gross receipts are $15 million or less for the three-year period ending in 2008. As a result of the longer NOL carryback period, small businesses that experienced losses in 2008 likely can seek an immediate refund of income taxes paid in earlier years.

Expensing limits continued for another year
Before the enactment of the Recovery Act, the Internal Revenue Code’s expensing rules allowed businesses to deduct up to $133,000 of costs incurred in purchasing certain business machinery and equipment, instead of recovering those costs through depreciation deductions over a number of years. The Recovery Act increased that amount and now provides that, for tax years beginning in 2009, certain qualifying businesses have the option to deduct up to $250,000 of such costs. Although the increased expensing limits are subject to some limitations (for example, the $250,000 deduction is decreased dollar-for-dollar for purchases in excess of $800,000), any amounts that cannot be deducted because of these limitations can be carried forward to later years.

The more liberal expensing rules provided under the Recovery Act provide small businesses with the ability to take increased, current-year deductions for costs associated with acquiring business machinery and equipment, which should help to offset the often substantial economic outlays such purchases require.

Bonus first-year depreciation extended for another year
The Recovery Act also provides a one-year extension on the ability of businesses to take a “bonus” depreciation deduction for the first year new assets are placed in service. The bonus first-year depreciation deduction generally is equal to 50 percent of the cost of qualified property acquired and placed in service in 2009. Qualified property includes most types of tangible personal property, certain improvements to leased real property and most software. As with the increased expensing limits discussed above, the extension of the ability to claim a first-year bonus depreciation deduction may materially reduce the costs associated with acquiring new business property and equipment.

S corporation built-in gain holding period shortened temporarily
Typically, a Subchapter S corporation is not subject to an entity-level tax on its income. Rather, the S corporation’s income flows through to its shareholders, who then pay tax on their pro-rata share of the S corporation’s income. However, a business originally formed as a Subchapter C corporation, which later elects to be taxed as an S corporation, is subject to a built-in gain tax at the highest marginal corporate tax rate (currently 35 percent) on certain gains that are built-in at the time of the corporation’s S election.

These types of S corporations generally are subject to the built-in gain tax on the disposition of appreciated assets acquired during their C corporation period for the first 10 years after their S election. In other words, if the S corporation disposes of appreciated assets from its C corporation period during the 10 years following its S election, the corporation is subject to tax on the gain at the highest marginal corporate tax rate. Thanks to the Recovery Act, the built-in gain tax will not be imposed on any recognized built-in gain if the seventh year in the 10-year recognition period ended before 2009 or 2010. This provision will enable S corporations subject to the built-in gain tax to dispose of appreciated assets earlier in the recognition period without triggering the built-in gain tax on the transfer.

Deferred tax on debt forgiveness income
When debt is discharged or canceled, taxpayers generally must include the amount discharged in taxable, ordinary income. In order to reduce the economic hardships often associated with the recognition of this cancellation of indebtedness (COD) income, the Recovery Act now allows taxpayers to elect to defer the recognition of certain COD income that would otherwise be recognized in 2009 and 2010, until 2014 and then recognize the COD income ratably over five years. The type of COD income that may be deferred under the Recovery Act is COD income that results from the reacquisition or modification of certain business debt instruments during 2009 or 2010. This provision enables certain businesses that might otherwise have taxable income as a result of a debt modification to defer the recognition of that income into future, and hopefully better, tax years.

Kelly C. Mooney and Heather A. McKee are associates in the taxation department at Gallagher & Kennedy, www.gknet.com.

Credit Union CEOs

Profiles Of ACULA Members And Credit Union CEOs

Pat Bodnar

Senior Vice President
Arizona Credit Union League & Affiliates

Pat Bodnar has never worked at a credit union. Yet, as senior vice president of the Arizona Credit Union League & Affiliates, she certainly works for them.

In the 24 years that Bodnar has been at the league, her colleagues say she has reached out to the business community more than anyone else on the staff.

Bodnar started out as an administrative assistant before moving on to director of administration and finance. She then became vice president of governmental affairs, and in 2004 was promoted to her current position of senior vice president.

“I didn’t know anything about credit unions when I started,” Bodnar says. “It’s been great fun to have a job that you love.”

Prior to joining the league, Bodnar handled constituent services for then-Gov. Bruce Babbitt. When Babbitt left office, the credit union opportunity came up.

“I fell in love with credit unions and their philosophy,” she says.

No doubt her tenure in the Babbitt Administration boosted her interest in political activity.

“I’ve always been interested in politics and politicians,” Bodnar says.

She was instrumental in developing a governmental affairs department at the league, and continues to oversee legal and legislative affairs and regulatory issues that affect state and federal credit unions. Bodnar is also responsible for public awareness campaigns, communications, community involvement, international partnerships and member service issues.

She credits her development of a government affairs program with helping to advance her credit union career.
“We’re turning credit union members into political activists,” Bodnar says. “Things like getting out the vote turn them on.”

When credit unions wanted to expand by making loans available to the business community, Bodnar was instrumental in forming a business lending council. The group assists business members in obtaining Small Business Administration loans and shares best practices among credit unions interested in making business loans.

“Small businesses need more options, not fewer,” she says. “Small business is the engine that drives economic growth.”

For her efforts, Bodnar was named SBA Advocate of the Year in 2007. She also serves as treasurer of Arizona Saves, an organization that strives to help Arizonans become financially self-sufficient through debt reduction and asset building. Bodnar also is a founding member of ArizonaFirst, a coalition of financial institutions dedicated to a public/private partnership aimed at preparing for any disaster or crisis in Arizona.

Robert D. Ramirez

President and CEO
Vantage West Credit Union

Not many people get promoted after 30 minutes on the job, but that’s exactly what happened to Robert D. Ramirez, president and CEO of Vantage West Credit Union in Tucson.

Born in Nogales, Ramirez received a degree in accounting from the University of Arizona in 1976. He worked for Sundt Corporation and Capin Mercantile Corporation before joining the Davis Monthan Federal Credit Union (which later became Vantage West) as assistant controller in 1985.

“I always tell my employees, watch for the keys that drop at your desk,” Ramirez says. “On my first day, my supervisor, the chief financial officer, resigned. I became acting CFO a half hour after I started.”

Six months later, examiners gave the credit union what Ramirez calls “a pretty bad rating.”

“I promised my boss, the president, that if he would give me three months I would get us back to a No. 1 rating,” Ramirez says. “If I did, he said he would double my salary and make me chief financial officer.”

Ramirez and his boss both made good on their promises. Ramirez moved up the ranks to executive vice president in 1996, and has served as president and CEO of Vantage West since April 2000. In addition, he holds the title of vice chair of the Arizona Credit Union League & Affiliates board of directors.

When Ramirez came onboard, the credit union had $99 million in assets with 36,000 members. It has grown to more than $1 billion in assets with 105,000 members.

“We’re consistent in providing overall value for the member,” he says. “Our goal is to be consistent, to meet their needs whenever we can.”

That became a little more challenging since the national economy took a nosedive. In the past year, Vantage West modified more than 3,000 loans totaling in excess of $55 million.

Mary Marshall

Retired CEO
Alhambra Credit Union

Early on, Mary Marshall experienced the value of credit unions. While living in the state of Washington, a local credit union provided needed assistance to her family.

“That’s when I knew I wanted to work there,” Marshall says. “I convinced them they needed to hire me.”

She started as a loan officer, and after five years enrolled in the Credit Union National Association (CUNA) Management School in Madison, Wis. Attending the CUNA Management School, Marshall says, “opened my eyes to the possibility of running my own credit union.”

When her family relocated to Arizona in 1984, Marshall figured it was time to pursue her career goal.

“I felt that I was schooled in credit unions and was prepared to see what I could do with another small credit union,” she says.

At the time she joined the Alhambra Credit Union, currently located at 35th and Northern avenues, it was what she referred to as “a sleepy little shop” that was serving the Alhambra School District, and was housed in the district.

“It wasn’t growing,” Marshall recalls.

It had 700 members and assets of less than $2 million. Twenty-two years later, when Marshall retired in December 2007 as Alhambra’s CEO, the credit union had 3,700 members and close to $20 million in assets.

So it’s not surprising that Marshall was the 2009 recipient of the Arizona Credit Union League and Affiliates Very Outstanding Credit Union Person award. For more than 35 years, the league has given the award to a special individual, recognizing that person’s level of service to the credit union community.

credit unions reaching out to small business

Arizona’s Credit Unions Are Reaching Out To Small Businesses

Relative newcomers to the field of making business loans, credit unions nonetheless have become key players in today’s tight-money economy. Barely 10 years ago, credit unions concentrated mainly on savings and checking accounts, and made personal, auto and home loans. But the Credit Union National Association says credit unions nationally originated $6.5 billion in business loans in the first six months of 2008, up 36 percent from the $4.8 billion in the corresponding period of 2007.

Credit union business loans in Arizona average about $240,000. Because the loans are relatively small, credit unions focus on small businesses.

For the past six years, Arizona credit unions have been working closely with the Small Business Administration and have emerged as strong SBA lenders. But because of the expertise involved in making such loans, only the larger credit unions are active in that segment of lending.

Steve Dunham, president and CEO of Canyon State Credit Union and board chairman of the Arizona Credit Union League & Affiliates, suggests that credit unions with assets of at least $400 million generally have the ability and staff support, so they are most likely to make business loans.

Then there is the issue of the federal cap, which the credit union industry has been trying to get Congress to increase or eliminate. Under the cap, credit unions may make business loans totaling no more than 12.25 percent of their assets.
The business lending cap comes into play at Arizona State Credit Union, one of the state’s largest.

“We’re getting very close to the cap, so we are being selective about what we do,” says Paul Stull, senior vice president of marketing at Arizona State Credit Union. “We keep bumping into it, and we have to find a way to make room. It’s quite a challenge to manage that.”

Despite the regulatory limits placed on credit unions, opportunities for businesses to borrow are available. Businesses face a combination of challenges, such as finding a money source and finding the right rate, Stull says.

“For many of the people we deal with, the rate is important, but many times they don’t have too many alternatives to look at for financing,” Stull says. “That usually means their needs are somewhat smaller than the targeted range of other providers. It takes just as much work to originate a small loan as it does a large one. Some would prefer to do only larger loans. A small business person might fall outside of that window. When they do, it’s tough for them to get the attention they want and deserve. Certainly small enterprises are not coming up on the radar of some of the larger lenders. That doesn’t mean rate isn’t important. It still is. But clearly you need to talk to somebody before you can get a rate.”

In all phases of lending, credit unions traditionally follow very conservative underwriting principles and only make loans to members. It’s not uncommon for an individual member to approach a credit union with a business loan request.

“The strong suit for credit unions is what it has always been — credit unions take the time to know their members,” Stull says. “That certainly puts us in a better position to meet the needs of a business. Many of our business customers have a personal relationship with us. They like the way we treat them personally, and they realize they can do their business banking with us as well. And that leads to a deeper relationship. The wider use of our business services is a more recent phenomenon. It’s a natural progression, and is indicative of the way we like to know our customers.”

Most experts see the economy beginning a slow turnaround toward the end of this year or early 2010. Consumers for the most part are still on the sidelines. Credit unions and the business community are keeping an eye on the nation’s savings rate.

For the past 20 to 30 years, Americans saved 7 percent of the income. But in recent years, before the recession hit, people were spending and borrowing more and saving considerably less. The U.S. Department of Commerce notes that the U.S. savings rate has been on the rise after almost five years in which consumers barely saved a penny.

Stull calls the rise in savings a good sign-bad sign situation.

“It’s good because people are being more cautious, developing more security,” he says. “The money they save goes to financial institutions and becomes available for lending. But, it’s a bad sign because people are not buying cars, motor homes, washers and dryers, and they’re not dining out as much as they used to. So it’s really kind of a double-edged sword.”

nurses, healthcare, doctors

The State’s Health Care Industry Is Strong, But The Recession Is Taking A Toll

Although I have only been in Arizona 11 years, St. Joseph’s Hospital and Medical Center has been providing high-quality care to Valley residents since 1895. And for the past century, St. Joseph’s has been known for two primary missions: Service to the poor and underserved; and outstanding care, particularly in the neurosciences, driven by groundbreaking innovation.

In the past 25 years, the innovations at St. Joseph’s have been significant, and other hospitals in the state have seen significant growth and expansion of services, as well. We have had unprecedented growth in the Metro Phoenix area, and hospitals have tried valiantly to keep up with the demand for acute care services. In the past 25 years, we have seen many new hospitals built, particularly in the suburban areas, and central hospitals have continued to expand.

Arizona was the very last state in the country to adopt a state Medicaid program in the early 1980s, but the Arizona Healthcare Cost Containment System (AHCCCS) has since been considered a national model of cost effectiveness. We missed out on substantial federal funds for the Medicaid system by being the last state to join, but we have nonetheless run an efficient system with the public dollars Arizona has received.

The health care system has continued to evolve in very interesting ways during the past quarter century. We have seen a clear movement to reduce the length of hospital stays, and many procedures are done in outpatient settings that were once only performed in hospitals.

We have made extraordinary progress in diagnostics and minimally-invasive procedures, which help people recover faster and get treated earlier when disease occurs. In a past era, patients who needed lung surgery had to have their ribcage cracked open and had weeks of extended recovery; now they have it laproscopically and are up walking around the very next day. Cancer used to be a death sentence; now it is often a chronic illness that can be virtually cured. We are better at treating chronic illnesses such as diabetes and heart disease, and we now know how important prevention is to limiting the impact of disease.

But significant challenges still remain. We have evolved into a system of “sick care” not “health care,” and although we know prevention pays dividends, that is not what physicians and hospitals are reimbursed for. The system rewards us when we treat the sickest patients, but not always for keeping them well.

In America, the concept of employer-sponsored health care is considered foundational to our economy. Yet, more than 46 million Americans do not have health insurance, and many of them are vulnerable children. In Arizona, the majority of employees work for small businesses that are under a tremendous strain to provide affordable health insurance. When people transition to public insurance, the reimbursements are declining so much that community physicians are refusing to accept new Medicaid and Medicare patients, while safety-net hospitals struggle to treat all who present themselves at their doors.

The boom-and-bust cycle is hard on the economy, but it is also hard on health care providers. We face a physician shortage in the Valley and a dearth of key sub-specialists for a region this size. In a recession, more people turn to public assistance at the same time the state is trying to cut budgets to compensate for diminished reserves.

Still, I remain hopeful for our state and our industry. Health care continues to be a strong economic engine for Arizona; good paying jobs, great career paths for a wide variety of disciplines and many avenues for innovation. Catholic Healthcare West, of which St. Joseph’s is the flagship hospital, is actively working with the new president and Congress to help shape health care reform so all Americans can have affordable and accessible health coverage. I believe there has never been a time when so much good is possible, and that change can help all of us live better.

Small Businesses Continue To Power The Valley’s Economy While Maintaining A Personal Touch

Small Businesses Continue To Power The Valley’s Economy While Maintaining A Personal Touch

As we approach a new era in Arizona business, I find myself reminiscing about the small business environment in the Valley 25 years ago, recalling the pioneering spirit of many courageous and determined entrepreneurs. In that era, the Five Cs were predominant revenue sources: cotton, copper, climate, citrus and cattle.

That is no longer the case in today’s marketplace. Technology, biosciences and health care are now dominant industries. Although today’s business climate is faster paced, it still preserves the attitude, perseverance and independence of the earlier years, and 97 percent of Arizona commerce is still fueled by small businesses.

In the Valley of 25 years ago, Motorola and Honeywell were key players in the corporate arena, and the “good old boys” network was alive and well. Though there were fewer participants and less competition, who you knew played an important role in opportunities. And, yes, business was done face to face. Often, a small business venture was cinched with a sincere handshake or a proposal outlined on a paper napkin over a cup of coffee.

And don’t forget the “good old girls.” Arizona has always been progressive with women’s involvement in business and political leadership. Arizona gave women the right to vote before the nation did. We have had four female governors in the past 25 years — no other state comes close.

’ve always called Phoenix “the biggest small town.” Even though it has grown to become the fifth largest metropolitan city in America, it still feels like a big small town to me. And, in many ways, Phoenix’ small business community connects much the same as it did in the small-town era, with networking, referrals, camaraderie and support.

The explosive change that arrived 25 years ago was technology. That’s when the microcomputer industry propelled us into a new era where cell phones, the World Wide Web and computer automation were about to be unleashed on our small businesses. I remember hauling around phone books and city maps in my car or stopping at a convenience store to use the pay phone to verify directions to a meeting — no MapQuest, no Google, no GPS. And today, if you want to know about social media, ask a 13-year-old.

Of course, 25 years ago there was less traffic and fewer freeways. For relaxation, I would head to Tempe, where I’d stroll along Mill Avenue and wander into Changing Hands Bookstore, and then head to Cookies From Home. With my new book and chocolate chip cookie,

I’d settle into a comfortable bench. Today, Mill Avenue is a much different business setting in the heart of Tempe. Also, light rail has rejuvenated many small businesses along its pathway through Phoenix.

In the past, the Valley’s small businesses have experienced many economic storms. Any downturn forces small businesses to reexamine expenses, processes and strategies, while requiring more efficiency, resourcefulness and creativity. Sometimes the hard decision must be made to retool, reinvent or even to start from scratch.

I think it is important for businesses that are doing well at this time to reach out to their suppliers and partners and “pay it forward” by doing business with those who may be struggling. Surviving these challenging times will fortify these businesses and poise them to recapture markets and revenues, and flourish in the upturn.

The sun shines on our business climate, with Arizona consistently in the running for one the top five states for small business. I believe small business will always be an integral part of the identity of Arizona; a place where we nurture creativity, value independence, respect stamina and expect tenacity.

Remember, the threads of small business weave a strong and vibrant tapestry, like the blanket you toss onto the back of a bronco. Sometimes it’s a wild ride and you need to hold on.

test tubes

Biotech Startups Need To Take Ideas From Concept To FDA Approval

Arizona has always been known as a great place to start and grow a business. While some industries have been staples of our economy for some time, there’s another growing industry that is bringing jobs, capital, and most of all, innovation, to our state. Arizona has, in recent years, become home to a growing number of biotechnology and medical device companies.

At the heart of every one of these companies is an entrepreneur with a vision and an idea. Some of these entrepreneurs are starting a biotech or medical device company for the first time. That’s scary enough. But the biotech world comes with a whole other set of hurdles that makes it even harder to go to market. One of the first and most important hurdles is getting U.S. Federal Drug Administration clearance. This is a challenging process every biotech, medical device and pharmaceutical company has to face. Here’s an inside look at how startup biotech companies gain clearance for their products and bring them to market.

For starters, which companies need FDA clearance and which ones can bypass the process? Basically, if a company plans to sell its product directly to physicians and hospitals, and wants insurance companies to pay for it, it needs that FDA clearance. All entrepreneurs in this space need to ask themselves that same key question when they start a new venture: Who are you selling this to?

For a small startup biotech business, or even just an engineer with an idea, the FDA process may seem daunting, costly, and in some cases, unnecessary. Many companies try to shortcut the system or choose instead to market under homeopathic regulations, which are quite different than the FDA’s. In these cases, there is often (but not always) less testing or insufficient data to support claims of what the product can do. In some cases, small businesses think the FDA makes the process so difficult and costly they simply can’t do it. It’s important for these startups to remember that gaining FDA clearance should be seen as an investment in their company that allows them to market effectively. It may seem stifling, but it also opens doors to sales channels that wouldn’t be available otherwise and can be very lucrative.

The public often doesn’t realize there are different types of FDA clearances biotech, pharmaceutical or medical device companies can apply for.

Pharmaceutical companies apply for a new drug application, while medical devices fall into three categories:

Class 1 —
This is for low-risk devices and it costs almost nothing to submit for this clearance.
Class 2 — This is for devices that are substantially equivalent to other devices already on the market. This process can cost about $4,000 just for the submission, not including the cost of testing and developing the submission.
Class 3 — This is for new devices or devices that are deemed life supporting/assisting and can cost millions of dollars after testing and the application process is complete. It’s important to remember that only products with a Class 3 are FDA approved, while the others are FDA cleared. FDA approval simply means that the FDA was involved in the testing and it was a new product unlike any other on the market.

Any startup biotech company will want to spend ample time researching the guidelines and class definitions before applying for FDA clearance. It seems like a tedious process, but it is a sound time investment and helps ensure the company only needs to go through the process once per product. Any mistakes along the way can result in going back to the drawing board and starting the process all over again.

To avoid this, these companies need to hire employees and consultants who have been through the process and can lend guidance from experience. Also, it is strongly advised to open a dialogue with people at the FDA. They are there to help companies get through the process smoothly and efficiently, and can help a startup overcome challenges along the way.

So when should you start the process? In most cases, a company will wait until it has a product prototype or a design it’s happy with before starting the application. The process to apply can often begin at the start of the business, but the real work begins once the company has something that can be tested for safety and efficacy. The good news is once the submission is complete, and if everything in the application meets the FDA’s requirements, it will only take 60 to 90 days on average to hear back from the FDA.

Once a company considers FDA clearance they can also expect some changes to their business. As with every form of government licensing, the FDA has rules and guidelines that must be followed, and these are known as the quality systems requirements. This is simply a form of management by the FDA that ensures biotech companies offer a consistent level of quality in every aspect of their business and are marketing products in a way that will not deceive or misguide the public.

In the end, every biotech company has to decide how they are going to grow their business. As we see more and more medical device and other biotechnology companies emerge in Arizona, we’ll see them go to market in vastly different ways.

Super-Powered Small Businesses

In This Recession, Small Business Survival Skills are Proving Invaluable

Tattoo Manufacturing Inc., in Tucson is a well-kept secret of success. This company with 95 employees bills itself as the world’s largest manufacturer of temporary tattoos. Indeed, it produces 6 million tattoos a day and has captured more than 90 percent of the temporary-tattoo market in the U.S.

Joyce Sinclair founded the company in 1985, serving fewer than 10 customers out of her garage. She eventually moved into the 40,000-square-foot building the company occupies today. Business exploded four years ago after Sinclair’s father, Jerry Nathanson, signed on and the daughter-father team ramped up production to include both retail-sold tattoos and custom tattoos purchased for promotional purposes by such customers as corporations, nonprofit organizations, sports teams and toy companies.

Steve Tooker and Grayhawk Capital in Scottsdale purchased Tattoo Manufacturing last year, and Tooker was named president and CEO. Although Tattoo Manufacturing produces a variety of specialty items, Tooker says 90 percent of the firm’s business is temporary tattoos. Half are sold at the retail level to Wal-Mart, Walgreens, Toys R Us and other chains. The other half is the custom tattoo side of the business, with more than 60,000 corporate customers. Twenty-five percent of the tattoo business is overseas for customers in 30 countries.

Tattoo Manufacturing had between $2 million and $3 million in sales in 2004. Tooker says sales will exceed $20 million this year, and he expects 25 percent annual sales growth for the next several years. Daily tattoo production likely will reach 7 million this year, and Tooker says that will translate into more hiring and the purchase of additional production equipment.

In this recession, companies like Tattoo Manufacturing are turning on its head the notion in business that bigger is better. Unlike the 800-pound gorillas of Corporate America, smaller companies avoided over-leveraging themselves before the economy tanked, mainly because they stuck to using the resources they had on hand.

“A big business is a legal entity and all its resources are whatever is in its pocket. A small business has the ability to rely on resources that a big business may not have. For example, managing the debt structure in a big business is mind-boggling,” says Bruce Hodgman, deputy director of the U.S. Small Business Administration in Phoenix. “On the other hand, a small business owner can draw on savings or dispose of a personal asset in order to lend to his company. These personal resources can be substantial and they can be quickly moved into the business. I think there is a lot of that happening.”

Small business success stories in the midst of this recession come as no surprise to Donna Davis, chief executive officer of the Arizona Small Business Association. She says many of her organization’s 3,400 members are keeping their businesses profitable.

“A good portion of them are hanging in there,” she says. “They are putting much more emphasis on watching unnecessary expenses. They are getting out and networking and outreaching. I’m really hopeful of what I have been witnessing.”

Nextrio is another Tucson success story. An information technology and computer network consulting company, Nextrio started in 2002 during the last recession and provides IT services for small and medium-sized businesses throughout Southern Arizona.

“We maintain computers, servers, networks, netbooks, cell phones and telephones — just about anything that has a plug,” says managing partner Cristie Street. The company also recommends, purchases, installs and configures hardware and software.

Nextrio started with three employees. By 2004, the staff had grown to six and Nextrio purchased the 9,000-square-foot building it shares with its investors. Today, the company has 20 employees. It started with one customer and now has more than 700. The customer base doubled and tripled the last four years after Nextrio invested in business-management software that allowed employees to “work on the business instead of in the business,” Street says.

Revenue has consistently grown between 25 percent and 50 percent annually since Nextrio opened. For the last two years, Nextrio has slowly restructured to create a diverse mix of income, according to Street. For example, 25 percent of the company’s business now comes from managed services in which customers lock in a fixed fee for ongoing IT support. Customers know what their IT expenses will be, and Nextrio knows it will have steady monthly income, Street says.

Income for 2009 is more uncertain because of the recession.

“If our revenue was an hour glass and you flipped it upside down, that would show the change in where our revenue comes from,” Street says.

Hardware sales, previously 40 percent of Nextrio’s business, have plunged as customers opt to squeeze more years out of their existing equipment. Now, service revenues are climbing as Nextrio devotes more time to maintenance, which Street says is more profitable than hardware sales. The company also has seen an uptick in business from bankruptcy litigation, which involves separating data, copying data and itemizing equipment at firms going out of business.

Street attributes Nextrio’s success to its ability to adapt quickly to changing market conditions and keeping employees apprised of the company’s financial condition. She also points to Nextrio’s entrepreneurial culture.

“We have a sense of all being in it together and accountable for each other,” Street says. “You don’t get that in large companies. We know we are all lucky to be working together, and we hold everybody accountable for pulling their fair share.”

Nextrio’s experience is a good example of how small businesses can alter direction and strategies quickly, allowing them to respond rapidly to changes in the marketplace.

“The secret to small businesses successfully riding out a recession is flexibility,” Hodgman says. “Small business owners have the ability to quickly adapt to a situation. A small business owner can gather key employees or family members in a matter of weeks and make a decision.”

Mary Schnack Media Services in Sedona is truly a small business. Owner Mary Schnack has only two employees. Yet, unlike some larger firms, the company’s revenues are growing. Schnack Media Services is a full-service public relations consulting company. A separate division, Communication Bridges, sends Schnack around the world to give presentations on communication topics for small businesses, corporations and nonprofits. Schnack started her public relations business in 1992 in Los Angeles, then moved it to Sedona in 1996, where it occupies the ground floor of her home.

Schnack says public relations revenue dipped a few years ago, then rebounded, with 2008 income doubling over 2007. She attributes the resurgence to a lowering of her fees and hiring full-time help.

“Having full-time employees really made a difference,” Schnack says. “It allowed me to really go out after new business more effectively.”

But the main reason is her customers’ appreciation of the expertise she offers.

“Through this downturn, I don’t see people cutting PR like they have before,” Schnack says. “There is a lot of publicity out there about why now is the time to crank up your PR. There isn’t a lot I have to say. Now people are approaching me.”

Schnack expects 2009 revenue to increase at least 50 percent.

“I think we can keep going on the uphill route,” Schnack says.

She expects small businesses will drive the economy’s recovery.

“Small business is what will bring us out of this recession,” Schnack says. “It will not be the corporations. It’s the small businesses that have fueled my growth.”

BestBill, a Phoenix company that uses technology to relieve its customers of the time-consuming task of generating and delivering invoices, has caught the attention of the SBA, and is its Best Business of the Year for Arizona for 2009.

Dan and Susan Haugland started the company out of their garage in 1999 to help medium- to large-sized businesses improve their cash flow.

“We don’t collect the money,” says CEO Dan Haugland. “We help our customers get their cash faster by taking data they provide to us, generating invoices from that data and delivering them either online or through the mail. We also can generate online payments from the consumer back to our customer.”

Growth has been the touchstone at BestBill since it opened. After occupying space at other locations, BestBill built its own 26,000-square-foot facility and occupied it in 2006. The company grew from 10 employees in 2003 to 33 in 2008. When the Hauglands first started, they generated 5,000 paper invoices a month. In 2008, they produced more than 34 million paper and online invoices, and they expect a 30 percent increase in billing transactions in 2009. BestBill opened for business with three customers. That number has grown to 130 nationwide in such industries as health care, utilities, manufacturing, transportation and property management.

Revenue increased 120 percent from 2005 to 2008. In 2008, gross income jumped 25 percent over the prior year, and the Hauglands expect a 30 percent increase in revenue this year. Net income doubled from 2005 to 2008.

BestBill has not been immune to the recession, however. The Hauglands note that their 2008 net income was flat and they have reduced staffing to 24 as they streamline to better confront the economic downturn. Still, they say they are on the path to continued growth and plan to open a second office in the Midwest in the fourth quarter of this year.

BestBill is a high-performing company because it does not waiver from its core business, Dan Haugland says. Susan Haugland, who is president of the company, attributes BestBill’s success to an emphasis on value.

“Not only do we feel that value, integrity and commitment matter, but we really value the client relationship,” she says. “I think that really matters — having solid client relationships. Those clients are happy to refer us to other clients.”

www.bestbill.com
www.communicationbridges.com
www.nextrio.com
www.prworks.ms
www.tattoosales.com

Tailwinds Pet Resort

Tailwinds Full-Service Pet Resort Provides Services Specifically For Dogs And Cats

Mischelle Hutchison and Holly Utzinger, Owners
Tailwinds Pet Resort
Est: 2009

“Even when you think you know it all, you won’t. Keep searching for ways to get smarter.”

The newest resort in town is for a very energetic kind of clientele. Tailwinds Pet Resort is catering only to the needs of our four-legged friends and doing so in high style. This full-service pet resort provides services specifically for dogs and cats, boasts 5,000 square feet on a half-acre lot and offers a wide array of pet-friendly perks.

Opening the resort has been the culmination of a lifelong dream for its two owners, Holly Utzinger and Mischelle Hutchison.

“Always wanting to have my own business and getting there is pretty thrilling,” Utzinger says.

Tailwinds’ state-of-the-art facility is bringing a new face to the world of pet care and it doesn’t skimp on a thing. It provides overnight boarding, daycare, a full-service grooming salon and a mobile grooming service. Unlike traditional pet centers, the pricing model is very straightforward and offers myriad options for the pets at no extra cost. Security cameras, separate air conditioning units for each building, and flat screen TVs are just some of the amenities that will be standard to pet guests.

The resort is comprised of three specially designed buildings that feature a round shape to decrease noise and give the animals a panoramic view of their surroundings. The two larger buildings include 4-by-6 standard rooms and 8-by-6 grand rooms for larger animals or multipet families. An additional, slightly smaller building consists of 2-by-4 petite rooms for the smaller pet guests. Ample outdoor space is the setting for integrated play for dogs of similar sizes, ages and energy levels that have been approved for this fun activity.

As for cats, they will have all the comforts of a real-life apartment, because that’s exactly where they will be. The specially-outfitted apartment includes a working kitchen, appliances and all the details that make cats feel right at home.

The owners’ currently are working to acquire the Pet Care Services Association (formerly ABKA) gold accreditation for Tailwinds. In order to achieve this, the resort must adhere to strict standards set by the Pet Care Services Association. Franchising the concept and facility design is a long-term ambition they also hope to achieve.

To fulfill their shared dream of an initial pet resort like Tailwinds, Utzinger and Hutchison combined their respective career specialties. In 25 years in the IT industry, Utzinger was able to hone her business chops in preparation for launching her own venture. Hutchison, on the other hand, has spent the last quarter century in the pet industry, and along the way has opened a kennel, several shops and even a mobile grooming business. After meeting through mutual friends, the idea for a pet resort was born.

The Tailwinds journey hasn’t been an easy one. City-imposed rules and regulations for construction took three years to work out and had many doubting whether the resort would ever open.

“I had other developers call me crazy (because) I was still proceeding,” Utzinger says.
There also were issues with Utzinger’s Small Business Administration loan that dragged on for months and left her feeling uneasy. The issues were finally resolved when Utzinger opted to switch banks and was able to close the loan in only two months. After doing some research, Utzinger discovered that the first bank had been in financial trouble.

“My responses to how these (challenges) were overcome were, ‘This is my new career, my dream, I am not giving up,’” Utzinger says.

In the end, Tailwinds officially opened its doors in February, exactly six years after the property was bought. The long process has made the opening even more special for the owners and at the heart of it all, is their shared loved of animals. Utzinger says her favorite aspect of Tailwinds is “playing with all the pets and watching the expressions of the clients upon their first visit. The most common response is ‘Wow!’”

During the course of planning and finally opening the business, Utzinger can’t stress enough the importance of having had the support of those around her.

“Make sure you have family and friends that can support you when things look hopeless and you’re ready to give up. If you have the vision, you should stick with it,” Utzinger says.
She also credits the SBA with helping Tailwinds get off the ground and leaving no stone left unturned.

“I can’t say enough about the positive impact the SBA had on the whole process. They really make you think and uncover things you wouldn’t necessarily have thought of,” she says.

The best part of fulfilling their dreams? “Offering pet owners a ‘real’ pet resort in the downtown area. So many people have come in and said ‘It’s about time!’”