Building Awareness about Cyber Security

Cyber security has been at the forefront of recent discussions. The latest ransomware attack, WannaCry, highlights the critical importance of creating a cyber strategy for your business. Do you know the root causes of most data breaches? Almost half the result of criminal or malicious attacks, however, human error accounts for roughly one-fourth of the breaches.

According to the National Institute of Standards and Technology, small businesses are especially vulnerable since they are viewed as soft targets by cyber criminals.  Even though hackers may not realize immediate financial gains through system penetration, small businesses may provide entry points to other systems with significant advantages. For instance, let’s say a smaller business does contract work for a larger company. If the small business has to log-on for any automated or computer-related activities and their system is compromised, the hacker could use the log-on credentials from the small business to penetrate the larger companies system. Once access is gained, the hacker can launch malware, ransomware, or infect the system with a virus. They could also take the exact same steps towards penetrating another system if  it was felt that an even greater reward was at stake.

An important item to remember is that a breach is not always immediate. Sometimes a system has been penetrated weeks or months before the malicious attack actually begins.

One way to manage your business’ risk is to identify what information your business Cyber frameworkuses and stores. Create a list with each of type of information and ask yourself, ‘what would happen to my business if … ‘. Once you have written down various answers, add a numeric value to each item from most to least important.  Next, identify who has access and control to your business’ information. No matter how small your company is, individual accounts should be set-up for each employee. That helps ensure accountability if something should happen. Remember, identification is the first step in creating a cybersecurity framework to safeguard your business from potential hacks. Additional posts will reflect the other key areas highlighted in the adjacent graphic.

 

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Women Entrepreneurs

If you know of a woman entrepreneur, please share this information with her. Ernst & Young is hosting a competition looking for high-potential women entrepreneurs. Their program  is looking for scalable businesses that they can help nurture and grow.

According to the website, the Entrepreneurial Winning Women executive leadership program helps with the following areas:

  • Expand entrepreneurial knowledge with the latest information, research and executive dialogues about business strategies and practices
  • Identify potential partners, strategic alliances, customers and suppliers as well as prospective sources of private capital
  • Provide access to informal, one-to-one guidance and support
  • Strengthen their executive leadership and business skills and identify opportunities to grow through meetings with senior advisors and seasoned entrepreneurs
  • Increase national and regional visibility for themselves and their companies among corporate executives, investors and the media

Don’t procrastinate! The deadline for applications or nominations is June 9, 2017. Here is a link to the website for more information: https://go.ey.com/2r9MH2I. Good luck!

Good Example of Marketing

Here is another great example of effective marketing. Many companies are trying to align themselves with social movements but have been unsuccessful at their attempts (ahem … the Pepsi commercial with Kendall Jenner that caused such an uproar). A stumbling block for businesses is that their message is not considered authentic nor does it resonate with the intended audience. There have already been numerous critiques of the Pepsi ad – and that is not the point of this post. We want to emphasize how to effectively communicate with audiences in meaningful ways. Here is a great example by Heineken. Notice, that they do not highlight their product until the end of the video.

Marketing Tactics

Small businesses often ask about creating marketing messages that have an impact. Here is a good example of how a brand was able to embrace an upcoming event with relevancy to most consumers – Mother’s Day. Notice the subtle hints that kids are bound to make messes and hopefully one has a strong paper towel nearby to clean up that mess! Although in one instance a mom uses her sweater to wipe something off her child. Another reason for this being a powerful marketing message is that it transcends nationalities/ethnicity, languages, and socio-economic statuses. That’s tough to do!

Anyways, here’s to all of the moms out there. We wish you a Happy Mother’s Day!

Monitor Employees’ Hours This Holiday Season

This post was written by one of our Graduate Research Assistants, Tara Ramljak.

Decking the halls this yeasantasworkshop-bigr will come with come with a precaution for employers. In May 2016, President Obama and the Department of Labor enacted a new overtime law that affects salaried and hourly employees. According to the Department of Labor, the salary threshold will rise form $455 per week ($23,660 for a full-year worker) to $913 per week ($47,478 for a full-year worker).[1] The final rule will also automatically update the salary threshold every three years, which increases predictability; strengthen overtime protections for salaried workers already entitled to overtime; and provide greater clarity for workers and employer.[2] This provision to the overtime law is set to take effect December 1, 2016.

Since the passage of the Fair Labor Standards Act, there has been an unkept promise that if employees work over 40 hours in a week, they would be paid time-and-a-half.[3] Employers have a choice on how they can combat the new overtime rule and may choose from the following:

  1. Pay time-an-a-half for overtime work; or
  2. Raise worker’s salaries above the new threshold; or
  3. Limit workers’ hours to 40 per week; or
  4. Some combination of the above.[4]

Further, employers have other options about how to respond to the salary level change:

  • Raise salary and keep employees exempt from overtime.
  • Pay overtime in addition to the employee’s current salary when necessary.
  • Evaluate and realign hours and staff workload.[5]

With the holidays and the increased shopping population, employers who take on extra staff because of holiday hours, the last two are the most applicable. The second provision is a great approach for Santa’s helpers during the holiday season. This provision works best when employees typically work 40 or fewer hours, but have spikes that require overtime pay allowing employers to budget for extra pay during those spikes.[6] The third provision allows employers to make sure that hours are managed for those who earn below the salary threshold allowing employers to hire extra helpers for the holiday season.[7]

When preparing for Santa’s big night this year, employers who experience spikes in business should be careful when managing employee’s hours. For more information regarding the new overtime rule, please visit: https://www.dol.gov/featured/overtime/

[1] https://blog.dol.gov/2016/05/18/who-benefits-from-the-new-overtime-rule/
[2] https://www.dol.gov/featured/overtime/
[3] https://www.dol.gov/sites/default/files/overtime-overview.pdf
[4] https://www.dol.gov/featured/overtime/
[5] https://blog.dol.gov/2016/05/18/plenty-of-options-with-new-overtime-rule/
[6] https://blog.dol.gov/2016/05/18/plenty-of-options-with-new-overtime-rule/
[7] https://blog.dol.gov/2016/05/18/plenty-of-options-with-new-overtime-rule/

 

Funding Your Business

The Kauffman Foundation released the below graphic about the kauffman-inc-chart-on-how-businesses-are-being-financedfunding sources used by new businesses. The businesses’ lists were generated from Inc. Magazine’s annual
rankings of the fastest
growing businesses in America. Those businesses were surveyed to determine the type of funding utilized.

A common mistake made by business owners is launching a business with debt financing. I was happy to learn that 67.2 percent of the businesses surveyed started off using personal savings, often referred to as ‘bootstrapping’, instead of taking on debt. Furthermore, 13.6 percent of the businesses have not used any kind of debt financing.

The results of this survey help dispel a couple of myths surrounding external financing. For instance, new businesses have unrealistic notions that they can start their business with government grants, angel investors or venture capitalists. Notice that the chart reflects only 3.8 to 7.7 percent were able to tap into those funding streams. These methods are not relevant for most start-ups unless an incredible innovation exists that can be successfully scaled in a short amount of time. After over a decade of working with entrepreneurs, I have yet to meet someone who received a government grant to start their business. Remember, as a rule of thumb, external funders want to recoup their investment quickly while receiving a nice return on their investment. Also, you will likely be giving up some equity, or ownership, of your company.

Credit card debt is the absolute worst kind of debt you can take on, yet 34 percent of respondents fall into this category. If credit card balances are diligently managed and balances paid off regularly, then it may provide short-term solutions to enhance cash flows or cyclical fluctuations. Several businesses make a catastrophic error by solely using credit cards to finance their business – ultimately leading to the demise of their companies. After all, it’s “easy cash” meaning that the business owner isn’t held accountable or required to justify expenditures. A typical scenario plays out like this: a business owner allows their credit card debt to accumulate, sometimes even reaching the maximum available credit. The business hasn’t secured enough sales to pay off the balance, so he or she starts making minimum payments. They are now accumulating  high interest rates on top of the monthly balance. Business owners that use their personal credit cards can make the situation even messier. I have encountered a few companies whose credit card debt reached $40,000 and, sadly, their business never got off the ground. As a result, they had to close their business and file for bankruptcy.

The best way to start your business is with your savings. It allows you to have full control of your business while you reap all the benefits of your success. If you have a business idea, determine the amount of money needed to start phase I. Try to save until you reach the initial amount needed to launch your business. Keep the operations as lean as possible while you launch as most people underestimate the amount needed to enter a market. Now you can set your sights towards your next goal in phase II. At this point you will likely have confirmed whether or not you were correct about the market conditions and have hopefully achieved a nice sales volume. Now you have historical data reflecting the cyclical flows of your business and ‘skin in the game’, meaning that you have personally taken on risk (investors look for both). You are also in a much better position to create realistic projections or forecasts based off of your historical data – not to mention a firmer calculation of how much investment is needed to reach subsequent stages.

Be smart about the kind of money used to launch your business. You have everything to gain but a lot to lose.

http://www.kauffman.org/blogs/growthology/2016/10/international-entrepreneur-rule

Mobile Responsive Websites

This is a term that may be unfamiliar, but it is very important. I gave a presentation recently and someone in the audience asked me if there was one new term they should learn, what should it be? That’s a tough one because there are so many important topics for small businesses. However, one item that is applicable to all small businesses – no matter what industry, location, or size, is to have a website be ‘mobile responsive’.

Did you know that people are 5X more likely to leave a site if it isn’t mobile friendly?[1]

So what exactly does ‘mobile responsive’ mean? Basically your website is coded in a way that allows it to detect what sort of device a consumer is using to reach it. In other words, your website would automatically shift the layout depending on the screen size – whether it is a smartphone, tablet, laptop, or desktop monitor. It eliminates the frustration of using the scrolling arrows to get from one side of the screen to the next. Below is a snapshot of NIU’s website. The first image is how the website responds to someone  visiting the site from a desktop computer. The second image is the exact same home page. Notice how the layout is different? The content automatically shifted so all you have to do is scroll down with your arrows instead of scrolling across when you are in the middle of a sentence. This makes everything much easier to find and the consumer is less frustrated.

So why is this important? Because consumers want quick answers to their questions. And the majority will use a digital device to search for that information. The easier your website is to navigate, the longer they will stay on it. After all, a goal is to have a ‘sticky’ website meaning that once they are on your website, they can easily find and engage with the content and will stay on it for a while.

 

 

[1] Google, www.google.com.

Price Deception: Have you become a victim?

I hope this post gets shared among your professional or personal networks. It’s applicable for both the business community (you cannot deceive consumers with your pricing strategies) and for consumers (pay attention to the details of your purchase).deception

Like most women, I enjoy shopping … unless it’s for a vehicle. I have never found the process enjoyable, despite our ability to peruse vehicles online. One of our sons has been on the quest for a vehicle and found one he was interested in. We visited the dealership and it appeared to be just what he was looking for. He planned to purchase it and drive it home that evening. Unfortunately, things didn’t go as planned. I won’t disclose the name of this auto group but my favorite search engine revealed they have over ten locations in Illinois and two in the Midwest. Therefore, they have plenty of experience and should not only know the law, but comply with it. The focus of this post is on a term called “deceptive pricing”. If you are not familiar with it, it basically means that you cannot try to influence a consumer’s purchase decision by lying to them or misleading them into thinking they are paying a lower price for something when they are not. Federal law prohibits the use of deceptive pricing (https://www.ftc.gov/enforcement/rules/rulemaking-regulatory-reform-proceedings/deceptive-pricing). This particular auto group appears to pride themselves on this type of tactic.

Here’s a quick overview of the scenario: Every vehicle has a blue sticker providing a brief description of an automatic “plan” that’s included with the purchase. The price is $995 and supposedly helps protect your vehicle against theft. The salesman proudly claimed that it can reduce your car insurance by $10 per month. After test driving the vehicle, we decided to move forward with the purchase. After all of the additional expected fees (sales tax, license plates, etc.), they added on $995 for that theft protection plan. Realistically, the vehicle in question does not make the top of the list for those reported stolen. And, after all, isn’t that one of the reasons why we insure our cars? I didn’t feel that package was worth the $995 price tag and asked that the device be removed. The car salesman told me they couldn’t remove it. I had no choice in the matter – it was automatically applied to every car they sell. I was shocked to think this was adding almost $1,000 to the cost of the vehicle for our son – and it was something we didn’t want/need. For anyone who knows me well enough, I wasn’t just going to accept that and leave it alone. After all, that was $1,000 being added to the purchase price! If it was $50 or $75, I probably wouldn’t have argued my point. We told the salesman that was a deal breaker and we were leaving. The general manager got involved and proceeded to tell us the exact same story as the salesman. Once again, we said that was a deal breaker. As we were walking away, the general manager came out after us. Guess what? Though he couldn’t eliminate the inflated charge, he could make other “accommodations” that would reduce the price by $1,000. That didn’t change our mind and we left. All along both the salesman and manager were adamant that they have very competitive pricing. What they didn’t want to disclose is what’s really going on here – and that is deceptive pricing. After we got home, we checked other vehicles this particular auto group has online and, sure enough, it appears they use this practice at all of their locations.

I revisited their website and nowhere is this anti-theft package for $995 discussed. Even when I searched their site for the term “theft protection” nothing appears. If this is such a valuable perk, wouldn’t you think it should be part of their marketing efforts or value proposition as to why a consumer should do business with them? Perhaps they could provide customer testimonials of how the device saved their car from being stolen? Maybe that type of benefit would allow them to compete on something other than price. But you and I both know the reason behind that notion. No one would purchase it if it was optional.

Here is what I surmise they are doing. The price of every single car is increased $995 from the advertised price to help cover their operational costs, which positively impacts their bottom line. That way they can say their prices are competitive but that’s not the case. If the real price was revealed, you may take your business elsewhere. The paperwork shows the price you agreed upon and then, boom, your price is automatically increased by almost $1,000. This isn’t fully disclosed until right before finance is involved to complete the transaction. You must pay close attention as it is quickly skimmed over when they are going over the price breakdown. Naturally, this is after you have completed all of the necessary paperwork because they typically have you hooked at that point. Let’s do an easy calculation: if each location happens to sell ten cars per day, that’s $10,000 each store pockets towards their bottom line. Since they have roughly 16 locations that amounts to $160,000 that they could be raking in every single day through deceptive pricing. Multiply that per month and over the course of a year it could bring in several million dollars just through deceptive practices. That certainly adds up to a large amount of money for something that most consumers won’t notice. With the volume levels an organization like this is able to purchase at, I would be shocked if the cost of the installed sensor is more than $100.

Now here’s what you can do. I firmly believe in the power of viral communication. Now that you are aware of this practice, I hope you will start the momentum by alerting people you know. I will be thrilled if I can help prevent one consumer from falling prey to these types of tactics. As they say, consumers beware!

Perhaps the Illinois Attorney General’s office should be notified about this scam or a class action lawsuit should be initiated. I wonder how many thousands of consumers in the northern Illinois area have fallen prey to this fraudulent practice …

Insight into Starting an Artisan Business

Recently an aspiring entrepreneur asked poignant questions about my prior business. He Mandi-Woven Homecoming Dress-croppedalso asked me to shed light on important lessons I learned along the way. Hopefully this same information will be helpful to you or someone you know who is contemplating whether or not to start a business.

How did I start the business? Initially I had a full-time job allowing me to “boot strap” or start the business with my own money. It is best to save money towards the launch of your business or continue with your full-time job for the first year or so. A rule of thumb is to have enough savings to cover your salary and living expenses for at least one or two years. Anticipate unforeseen expenses you encounter along the way!

How much money is required? There is enormous fluctuation in the amount of money required to start a business. Some industries are complex and require substantial investments, certifications or licenses whereas others have minimal required investments. I was lucky in that sense. Since I was launching an artisan business it allowed me to get started for $500. I had already accumulated some of the tools and machinery needed which drastically lowered the costs. Some businesses require $10,000 or more for the initial launch. Be sure and do your research.

How long did it take me to make money? My business became profitable within approximately 1 ½ years. However, I did not collect a salary until about my third year in business. Profits I made were invested into the business, allowing for continued expansion of operations.

How did I build a customer base? Initially my business targeted two separate sectors. Obviously, I was at a disadvantage from the onset due to the low investment I had to get the business off the ground. I thoroughly studied the industry and determined that one particular segment allowed much easier access than the one I wanted to focus on. Therefore, I heavily concentrated on the sector that had a lower barrier-to-entry. This strategy allowed me to quickly connect with consumers and rapidly build a customer base. I simultaneously worked on the other sector as that took much longer to penetrate. The industry I was in had minimal repeat customers so it was important to identify the circles or clusters as well as the influencers. After that, the business was solely grown through organic, word-of-mouth campaigns. The first advertising I did was around year seven when I started expanding my business regionally.

Do I have suggestions for determining a business’ location? If possible, I encourage businesses to initially start with a home-based business. This keeps the overhead costs to a minimum while allowing you to really work through your idea as you build your business. It helps mitigate your risk until you learn whether or not consumers will be interested in your products, if there are seasonal fluctuations to account for, and if your profit margins are what you anticipated. After your model is proven successful and you are ready to expand operations, it is easier to identify the correct type of location that puts you in close proximity to your customer base. With all of the technological advances, it’s tougher to spot if someone has a home-based business.  New businesses tend to make a major mistake by signing a multi-year lease on a storefront that requires a personal guarantee. That means if the business fails, you are required to personally pay for the remainder of the lease.

Would I start a business again in the future? It is dependent upon various circumstances. Right now I am not planning on it, although I have had some pretty cool ideas that I have been curious about exploring. When I was teaching, I told students about niche opportunities within their field and how they could capitalize on voids in the marketplace. I thoroughly enjoyed the time I owned a business and it was at a perfect time for me but it was a lot of work. People underestimate how much time is involved in running a successful business and the worries that accompany it. Yes, the rewards are wonderful but it takes a great deal of dedication.

What important lessons did I learn? There were a ton! But three major ones come to mind. The important thing is to make sure you are always learning. Don’t ever feel that you know it all. I made the mistake of working “in” my business instead of “on” it. Since I was at a disadvantage for the initial lack of investment I had, that meant working that much harder. I became accustomed to handling everything myself. Our city did not allow home-based businesses to have employees which further complicated matters. Obviously, that curtailed my ability to utilize employees so, instead, I was able to supplement work through subcontractors. No matter what, my ability to concentrate solely on growing the business was limited. Instead, I became too involved in the specific details of each project. Business owners need to concentrate “on” their businesses and not be bogged down by the minutia of the projects. You can work on certain aspects of a project, but there should be a hand-off point of which the work goes to employees to finish up.

The second and third points go hand-in hand. Cash is king . . . there is no way getting around it. Your business will likely end if you run out of cash. The biggest lesson I learned is that even though inventory is considered an asset to the company, it drains your cash. Do not look at it as an investment. There is a lot that can happen to inventory causing it to lose its value. My business had a comfortable profit margin but I almost ran out of cash. At the time I didn’t understand how I was profitable and making money yet my cash was being depleted. My accountant quickly realized that I had excessive inventory which was depleting my cash reserves. As a result, I had to adapt how I purchased goods. So another good lesson is to ensure you have qualified professionals working alongside you to assist with areas you may not be as knowledgeable about. Our society has grown accustomed to relying on results from a search engine query to answer specific questions, but there are likely contributing factors that may affect the situation. That’s why professionals, such as attorneys or accountants, are so important.

Through the years, I have met numerous people who financed their business with credit cards. Luckily, I didn’t fall into this trap as it can be detrimental to the well-being of your business. Occasional purchases are fine, but only if you can pay off the balances within a month or two. Do not finance your business with credit cards! The interest will begin to cripple your business and, if it keeps accumulating month after month, your business may begin to suffocate. Look for lower cost alternatives, even if that means you have to “settle” for the time being. Look closely at each expense to see whether or not you really need it or if a purchase can be postponed.

In conclusion, it is important to seek the guidance of individuals with relevant industry experience. It may be smart to form an advisory board that can help round out your knowledge. Understand that a business does take a lot of work but generally provides owners with a wonderful opportunity filled with adventures. Don’t be afraid to take that first step!

Importance of Independent Businesses

Our nation has a plethora of skilled bargain hunters. A whopping 79 percent of AmericansMain Street 25 and older categorize themselves as bargain shoppers and 83 percent compare products online before they make a purchase[1]. Roughly 36 percent[2] of Americans admitted to feeling guilty if they pay full price for an item.

Comparisons between various cultures often reveal surprising results when it comes to workmanship and originality. A survey[3] provided insight about intrinsic values driving purchasing decisions between American and Chinese consumers. The survey was geared towards luxury purchases because that is normally where higher quality components or individuality become the forefront compared to items that are mass-produced. It’s amazing the vast differences between how the two distinct cultures view craftsmanship. The Chinese, whose business model is synonymous with mass production, do not solely base their purchasing decisions on price whereas that is a dominating factor for American consumers. An article in the Chicago Tribune[4] highlighted this sentiment revealing that U.S. consumers gravitate towards cheaper items regardless of where they are made. Yes, it’s great to get a fantastic bargain, but at what expense? In many Asian countries, where many of the mass-produced items are manufactured, forced labor, child labor, and human trafficking still exists and allows large companies to sell their products so cheaply. The International Labour Organization[5] estimates that 9.5 million people in the Asia Pacific region are victims of forced labor. The organization also reports that there has been a significant spike in debt bondage.

One of my colleagues just returned from Italy and showed me an awesome pair of hand-made sunglasses he purchased from a street side vendor. I have worked with hundreds of artisans through the years and have never met anyone that hand-made sunglasses! The workmanship was impeccable and the price was in line with what a higher-end pair of sunglasses would cost from a major brand in the United States. I cannot imagine the loss America will face if we lose the craftsmanship that has been the backbone of our nation for centuries.

Luxury products

Recently I was awaiting the arrival of attendees for a meeting and had a bit of extra time. I was in a small Chicago suburb that I hadn’t been in for a while so I took advantage of the opportunity and walked around the downtown area while I waited. This suburb always had a thriving downtown area loaded with independent businesses. Historically, it has been a model community for what successful downtown districts should resemble. I was saddened to see how many storefronts had “For Lease” signs in them or brown paper covering the windows. A vibrant restaurant scene still exists but the independent businesses are disappearing from the landscape. According to data obtained from the U.S. Census, new business formation is beginning to reach pre-recession levels which should be good news for local communities. Yet, the jobs created from these businesses have declined since the late 1990s. This is relevant because it means many remain as non-employer businesses due to limited opportunities for growth. Data indicates there are roughly 7.5 million establishments in the U.S. of which 3.5 million have under four employees. The graphic below represents employment gains and losses from new businesses formed and those that have ended during the period of 1993-2015.

US Census Employment gains and losses

With price solely dominating American’s purchase decisions, no wonder independent businesses across the United States are experiencing difficulty maintaining their profitability or hiring additional staff which, ultimately, leads to a decision to close their doors. It is almost impossible for smaller entities to compete on price with larger businesses, since they primarily purchase mass-produced items in large volumes.

Over the last couple of years in America there has been a stronger push for locally sourced food. Numerous restaurants around the country are striving towards “farm to table” menus which feature products made throughout their area. Hopefully we can carry this concept further to the artisan and independent business community. Everything shouldn’t always be about the best bargain or the bottom line. Other important factors also need to be considered. Hopefully next time you think about a purchase, you won’t solely base that decision on price.

 

[1] Boston Agent Magazine, October 8, 2015. Survey: Americans Bargain Shop for All Things – Except Loans. https://bostonagentmagazine.com/2015/10/08/survey-americans-bargain-shop-for-all-things-except-loans/

[2] Consumer Reports Magazine, April 30, 2014. American’s bargain-hunting habits: What shoppers will and won’t do to save a buck. http://www.consumerreports.org/cro/news/2014/04/america-s-bargain-hunting-habits/index.htm

[3] Jing Daily, December 5, 2014. China’s luxury consumers buy for quality while Americans seek bargains https://jingdaily.com/chinas-luxury-consumers-buy-for-quality-while-americans-seek-bargains/

[4] Leverone, Bob, Associated Press. Article appeared in the Chicago Tribune. April 14, 2016. Poll: Americans prefer low prices to items ‘Made in the USA’, http://www.chicagotribune.com/business/ct-americans-prices-vs-made-in-usa-20160414-story.html

[5] http://www.ilo.org/global/about-the-ilo/newsroom/news/WCMS_075504/lang–en/index.htm