By Kenneth H. Marks    

If you are the owner of a small business and are refinancing debt or a bank loan or leasing a facility or new equipment, chances are that the lender or lessor will require you to sign a personal guarantee.  

For several years prior to the recent recession, credit was easy, and it was possible to obtain a line of credit or lease new equipment or space without having to personally back-stop the liability. Not today.  With rare exception for those businesses with extraordinary financial strength, obtaining credit of almost any type for emerging growth or middle-market businesses—that is, those from start-up through $100 million in sales—will require guarantees by the owners with 20% or more of the equity in a company.  

What does this mean? It means that you need to be prepared to pay out of your own pocket if your company no longer can make the scheduled debt payments.

So how do you manage the risk and mitigate the liability associated with these personal guarantees?  Developing an effective strategy for structuring and managing the personal guarantee begins with understanding your lender’s objectives and perspective.  

• Ask why a guarantee is needed. Start by asking the lender or lessor why the guarantee is necessary. Some may want it to assure that you, as a significant owner, are tied to the business to increase their likelihood of being repaid (especially if things do not go as planned).  In the case of a financially weak business, they may be requiring additional collateral or assets to make the loan or lease.

• Determine how much risk you will take. Next, determine the maximum out-of-pocket amount that you are willing (or able) to actually pay if everything goes wrong and you must personally write a check.  Knowing this amount will play into the terms and the amount that you should guarantee.  As an example, some owners do not mind guaranteeing their company’s debt as long as they are never really at risk of loss—in other words their worst case out-of-pocket amount is zero.  You can accomplish this by assuring that the amount of debt guaranteed never exceeds the liquidation value of the assets of your business, taking into account the priority of liens and repayment if the business went bankrupt.

If you are okay with taking some financial risk, then calculate the same liquidation value and add the acceptable amount.  Once you have established a limit, have your controller, bookkeeper, or accountant provide a monthly or quarterly estimate of liquidation value based on your actual financial statements. This will provide you visibility so you can track and manage the risk being taken.

If you are in a position to shape the deal, use the information above when negotiating the terms of the guarantee so they fit your situation and limits.  

Here are some of the key points that you should consider as you talk to your lender or lessor:

1. Guarantee of payment vs. guarantee of collection. The most common guarantee is that of payment.  This means that if your company does not meet the agreed payments, the lender (or lessor) can demand payment directly from you as the guarantor without pursuing further action against the company.

As the guarantor, you would rather be a guarantor of collection.  This arrangement typically requires the lender (or lessor) to first exhaust its options against the company before it can demand payment from you.  So, if you never allow your company to borrow more than the liquidation amount of its assets and you made a guarantee of collection, you could avoid ever having to write a check from your personal assets. Alternatively, you might seek to completely limit any risk unless you commit fraud in managing the business; this is sometimes referred to as a fiduciary guarantee.

2. Limit scope and collateral. Limit the scope of the guarantee to exclude recourse against your house or other specific property.  In addition, do not agree up-front to liens against your property or a pledge of the stock in the business.

3. No spouse signature. Avoid having your spouse sign the guarantee, so that the guarantee is based solely on your assets.  Be prepared to provide financial statements showing only your individually owned assets and liabilities.  

In most states this limits the risk to only assets held solely in your name, not joint assets or those of your spouse.  So, if your house is owned with your spouse jointly (or just by your spouse) the laws in most States would prevent the lender from taking recourse against it.

4. Set limits. Quantify the limits on the amount of the guarantee, either in relative terms or absolute terms.  For example: Your company may have a line of credit with $2 million total availability.  Seek to limit your exposure to 20% of the outstanding balance or a maximum of $200,000.  This is particularly appropriate with multiple owners whereby you may desire to limit your exposure based on your percentage ownership.

Additionally, negotiate to reduce the guarantee as the performance of the company improves.  As an example: Your company has a debt-to-equity ratio of 3:1 post-financing. Seek agreement to reduce or limit your guarantee when the company’s debt-to-equity ratio falls below 2:1.  

Also consider having the guarantee become less onerous over time, based on the bank’s continued relationship with your company.  For example: A guarantee of payment could convert to a guarantee of collection after a couple years of a spotless repayment record, or the guarantee could burn off gradually.

5. Adequate insurance. Insure the supporting collateral for the loan or lease on a replacement cost with limits commensurate with the cost to replace the property.  You do not want to find yourself caught off-guard in the event of theft or hazard and then be obligated to personally pay for lost inventory or property that is part of the deal.  

Also, take the time to make sure your business interruption (business income and extra expense coverage) limits are in sync with the amount of time and additional expense it would take to restore normal operations after a disaster. In addition, consider fraud insurance to protect against an officer or employee stealing from the company and incurring debt on a line of credit.  Broad form property insurance usually covers only a small amount unless specifically added to the policy; increase this policy limit to match the credit facility limit.

From a practical perspective, guarantees are difficult to negotiate or to get much movement on unless the lender (or lessor) wants your company’s business and unless there is competitive pressure giving your company and you the ability to haggle for improved terms.  Negotiating these terms is done in the context of the overall credit facility or lease agreement at a time of change.

Lastly, get good, independent advice from experienced legal counsel and financial experts.  If you have partners or other shareholders, you will likely want separate counsel representing you vs. your company.  The nuances of the guarantee are specific to you and your circumstances…get qualified legal advice to assure the terms and concepts fit your situation.

Kenneth H. Marks is the founder and a managing partners of High Rock Partners, providing advice and leadership for growth and investment.  He is the lead author of the Handbook of Financing Growth published by John Wiley & Sons www.HandbookofFinancingGrowth.com.  He can be reached khmarks@HighRockPartners.com.  

By Steffanie  Wood    

Spring is here, and that means it’s time to spruce up your house, get rid of clutter and get things organized. But as you start your spring cleaning, go beyond the home and yard and look for ways to rejuvenate their investment portfolio.

Instead of taking the “out with the old, in with the new” approach, simply make a consistent effort to make progress toward your financial goals. You may need to make adjustments in response to changes in the financial markets, the economy and your personal situation.

Here are tips to get your started:

1. Dispose of things that aren’t working. Whether it’s a burnt-out computer or a treadmill that lost its grip back when “the Web” was reserved for spiders, we all own things that are no longer useful.

And the same may be true of some of your investments. If one hasn’t performed the way you had hoped, and you’ve given it adequate time, you may be better off by replacing it and using the proceeds to purchase another investment.

2. Get rid of duplicates. If you went through everything in your house, you might find several items that do the same thing. Do you really need two toaster ovens? And how many radios can you listen to at one time?

If you looked at your investment portfolio in this same way, you might be surprised to find some redundancies. For example, do you own several stocks issued by similar companies that make similar products? This might not be a problem when the stock market is booming, but it could be a definite concern if a downturn affects the industry to which these companies belong. Always look for ways to diversify your holdings. While diversification, by itself, can’t guarantee profits or protect against loss, it can help you reduce the effects of volatility.

3. Put things back in order: Over time, the spaces in your home can get “out of balance.” Perhaps your flat-screen television is crowding out your family pictures, or your new desk takes up too much space in your home office. With some rearranging, you can usually get things back in order.

The same need for rearrangement may apply to your portfolio, which might have become unbalanced with too much of one investment and too little of another. This situation could undermine your financial strategy, especially if the imbalance means you are taking on too much risk or, conversely, if your holdings have become too conservative to provide the growth you need. Look for ways to restore your portfolio to its proper balance — one that reflects your risk tolerance, time horizon and long-term goals.

By giving your portfolio an annual spring cleaning, you can help make sure it reflects your current needs and is positioned to help you make progress toward your key financial objectives. And you won’t even have to get near the dust cloths or furniture polish.

Steffanie  Wood is a financial advisor with Edward Jones, Unit 3103, 11251 Campfield Dr., Jacksonville. She can be reached at 904-751-1747 or Steffanie.Wood@edwardjones.com.

By Maxine McBride     

Everyone is networking these days. Networking builds relationships and lays the groundwork for new business. A critical component of networking, however, is following up.

Following up is an art whose skill is worth developing. The proof? Everyone can recall a well-written, thoughtful note that stood out above the rest. That note is follow up done to the “T”.

If you’ve never been taught the art of following up, you are in for an informative lesson that will help you cultivate relationships, which may eventually lead to new business.

Follow up is key to business development, whether you’ve just attended a networking event, hosted a table at a dinner event, or bumped into someone at the grocery store. All of the time you spent catching up or learning about that person isn’t worth much if you don’t take it to the next step.

• Create a reason to follow up in the very near future. Here are a couple of questions to get the ball rolling: “May I call you to talk more about what we do?” “May I add you to our e-mail list”?

• Set up a plan to send a note immediately following your interaction. No matter how you do it, follow up should happen immediately (within 48 hours) after the meeting. Make a phone call to schedule a one-on-one meeting; send an e-mail and include the link to that newspaper article you mentioned while talking to the person; or send a handwritten note. Do anything—just follow up!

• Set up a follow up system. Every company has a follow up system that works best for its industry. It’s important to use one that works for your team. The system is no good if no one uses it. A simple follow up system can be as easy as a contact management computer program, a spreadsheet, a good old-fashioned tickler file that you maintain or some other tracking mechanism.

• Create goals. It is also important to create internal goals for turning those contacts into leads and clients. In today’s business environment, you need to be aggressive, uncomfortable, and brave. You won’t get anything without asking for it. Create an accountability system within your team to keep everyone on target.

• Keep networking. To keep your contacts fresh and flowing, make sure you and your team are consistently networking. Set internal goals for the number of functions you will attend each week or each month. Identify your target market and don’t just look at their industry events – think about other social, civic or educational events they may attend.

Remember that every opportunity is a chance to make a new business contact, prospect, client, advisor or friend. Don’t overlook something or someone as unimportant or not worth your attention or effort – you never know when a diamond will be found in the rough. And please, don’t forget to follow up!

Maxine McBride is the president of Clockwork Marketing Services, Inc., a full-service marketing firm in the Jacksonville area. Visit www.clockworkmarketing.com or call 904-280-7960.

By Ashley Feit    

When Debbie Burgess lost her high-paying, financial services job, she never dreamed it would lead her to

 opening her own business. Like many people, Burgess thought she would one day retire from her corporate America job and live comfortably ever after. She went through the emotions that most people experience when losing a long-time position, and then she started clearing out her closets.

Burgess started with all those wool business suits she had collected traveling the country as a training specialist working with financial institutions. She suspected that she would never need them again and gathered them up to consign. It was then that she started thinking about a new business concept in consignment.

“I thought about all the motorcycle apparel I saw in my closet, and that my husband had in his, and wondered what we could ever do with the clothes that are in good condition, but didn’t fit anymore,” Burgess explains. “Most consignment shops don’t really have a customer market for motorcycle apparel.”

A unique idea is born

After consigning her suits, Burgess went home and did some Internet research. She could not find a single consignment shop anywhere in the country that specialized in motorcycle apparel. She did find the National Association for Resale and Thrift Shops (NARTS), and she found it just in time to attend its 25th annual conference in Scottsdale, AZ.

Burgess attended the conference as a future business owner and pitched her plan to a few successful shop owners. She wanted to validate her concept since her initial research didn’t reveal another shop like it in the country.

Her concept was centered on her desire to do something for the motorcycle enthusiasts, who, like herself, are always so willing to help others. By giving them a shop where they could recycle those expensive motorcycle apparel items that no longer fit, they could get part of their investment back and help the planet. It would be a small, local solution toward the growing problem of post-consumer textile products contributing to our landfills.

Burgess also wanted to do a few things different for her customers such as allowing them to choose the charity that their unsold items would go to.

By the end of the four-day conference she was known as the “motorcycle lady,” and she also knew that her idea had been validated.

Developing the plan

After confirming her idea at the conference, Burgess returned to Jacksonville ready to bring her idea to life. She contacted the Small Business Development Center (SBDC) at the University of North Florida where she attended workshops and was introduced to a Certified Business Analyst for guidance and idea sharing.

As Burgess was putting together her advisory team, she discovered, much to her surprise, that most all of them shared her same passion for two wheels and the open road. The attorney she partnered with, the insurance agent she’s using, and several people at her bank all ride motorcycles.

“It was great to know they were all motorcycle enthusiasts too. It’s hard to fail when you have a team that believes in what you are doing and shares your passion,” says Debbie.

Location, location, location

Burgess worked on implementing her business plan and set a budget of $25,000, which she pulled from her personal savings and her 401(k). After developing her budget, she began the most difficult part of her new business set up— finding the right location.

“Securing a location was the most challenging part of starting my business,” explains Burgess. “I wanted to be in Mandarin close to my home, and I wanted the location to have safe, easy access for motorcyclists.”

She didn’t have a hard time finding a location, but rather in negotiating an acceptable lease.

“You would think that with all the vacancies in strip malls, this wouldn’t have been so difficult,” Burgess says. “The issue was that I didn’t want to sign a multi-year lease until I knew that my business would work.”

With no examples or history to base her unique business on, Burgess didn’t know what to expect for the interest and profitability of her shop. She didn’t want to get tied into a long lease. After much looking and negotiating, she finally secured a location and a lease to her liking.

Setting up shop

With a lease signed for 2nd Ride Around Consignment Shop in Mandarin, Burgess began working on building the inventory for her shop. She had to do this quickly because a commercial lease agreement requires the business to be active within 30 days of signing the lease, but she was able to negotiate a little extra time. Burgess contacted all of her friends and fellow riders for consignments and shopped garage sales and other stores. She invested about $2,000 of her budget in her initial inventory.

The largest investment for the shop was in the store set up. Burgess spent around $10,000 for furniture and fixtures, and she looked for short-cuts to save money. For example, she used shower curtain hooks for hanging jeans and bought them on markdown all over town. Then, she contacted the manufacturer to purchase them wholesale.

She also visited several motorcycle dealers in town to let them know what she was doing. She asked them to donate posters to help her decorate the inside of the shop. This obviously saved in some decorating expenses, but, more importantly to her, she wanted all motorcycle enthusiasts to feel welcome in her shop, regardless of what brand of motorcycle they ride.

Getting the word out

With a new shop, a sign, consigned inventory, all Burgess needed was customers, and it didn’t take long to find them.

“Motorcyclists are a tight-knit group. Word of mouth is very powerful with all the connections of biker events and groups,” says Burgess. “I was counting on this, along with doing personal presentations at motorcycle riding groups’ monthly meetings. I didn’t have an advertising budget.”

After soliciting her friends and connections for consignments, Burgess had already developed interest in her business. Then she started networking through all of the motorcycle associations, shops and events across town, and people started coming in.

One of her first customers was a relative of an employee at Channel 4. The customer passed the word on and the connection resulted in a story on The Morning Show shortly after 2nd Ride Around Consignment Shop opened.

“I had a lot of people come in after that spot ran, and they said they heard about it on the news,” says Burgess. “You just never know who is going to walk into your store and what they will do for you.”

Re-cycle business is rolling

After less than four months of business, Burgess has more than 55 consignors at 2nd Ride Around Consignment Shop.

“What a ride this has been! I knew it would work; however, I never dreamed it would take off like it has,” Burgess explains. “If it keeps going this way, I’d like to start looking at more locations.”

The idea for more locations has always been part of the big picture for Burgess. “I’d like to offer more locations, and one day, take the concept nationwide with franchise opportunities.”

Sidebar 1

2nd Ride Around Consignment Shop

11018 OId St. Augustine Road, Suite 111

Jacksonville, FL 32257

904-379-9167

www.2ndridearound.com

2nd Ride Around Consignment Shop accepts: men and women’s motorcycle apparel, jeans,

T-shirts and shoes, as well as motorcycle themed purses, jewelry and home décor items. Consigned items are on the sales floor for up to 60 days. The sales price is based on competitive market price and brand research. Consignors will receive 40% of the selling price excluding sales tax. Items that do not sell at the end of the 60 days can be picked up by the consignor or donated to the charity of the consignor’s choice. 2nd Ride Around works with Hubbard House, Humane Society, and the Vietnam Vets.

Sidebar 2

A Passion for riding

Debbie Burgess wasn’t always a motorcycle enthusiast. It wasn’t until she met her husband, Jim, that she got the riding fever.

“I can remember seeing folks on motorcycles back in the ’90s when I was commuting to my corporate job in downtown Jacksonville,” she explains, “and I would think that they must be nuts doing 65 miles per hour on a motorcycle.”

Burgess met her husband in 2002 and he liked to ride; by 2005 she was riding her own motorcycle. “I quickly started enjoying riding, even when I was on the back. There is something about being on a motorcycle, with the wind blowing through your hair, that allows you time away with no worries. That’s what gets you hooked on the lifestyle.”

They both enjoy riding so much that they rented motorcycles on their honeymoon and rode the coastal highway in California. “It was a great thing for us to share on our honeymoon—a common interest that we both have a passion for.”

When she lost her job, Burgess’ husband suggested doing something she would enjoy this time around. As she began to think of what kind of job she would enjoy, riding her bike with Jim came to mind, but she knew no company was going to pay her to do that. She began to think about how she could work with people who shared her passion for riding. She knew she’d had enough of the corporate traveling life—flying all over the country all week and only home for the weekends.

“I thought it would be a given success story because it would be owned and operated by motorcycle enthusiasts that understand the lifestyle,” Burgess said. “I wanted to make a difference by doing something for all the bikers that are always willing to give to others. At the same time, I could help our local economy by opening an independently-owned store in my Mandarin community.”

Ashley Feit provides writing and public relations services to small business. She can be reached at acfeit@att.net.

A number of tax laws enacted in 2009 may affect how much you pay in taxes this year. Business.gov, a portal for information on federal regulations affecting small businesses, summarized a few you should be aware of as you prepare for the 2010 filing season:

• Expensing business property and equipment. According to the IRS, many small businesses that invest in new property and equipment will be able to write off most of these purchases on their 2009 returns. This is because the American Recovery and Reinvestment Act (ARRA) extended the bonus depreciation and increased the Section 179 deduction.

Normally, businesses recover these capital investments through annual depreciation deductions spread over several years. But this year a quick write off of up to $250,000 on the cost of machinery, equipment, vehicles, furniture, and other qualifying property place in service in 2009 is now possible. The IRS has more information on this here.

For more information on when and how to take the deduction, go to www.section179.org, which is a free resource for small businesses.

• Cancellation of business debt. The ARRA also enables certain businesses to elect to delay recognition of income from the cancellation of business debt in 2009 or 2010. Income recognition can be deferred until the fifth year after the reacquisition, and then the income is included ratably over the following five years.

• Business credit for COBRA premium assistance to employees. If your business provided COBRA assistance—extension of health benefits—to employees who were terminated in 2009, ARRA gives you a 65% credit against the COBRA amounts paid. The credit is taken against employment taxes on Form 941, Form 944, or Form 943. The credit is treated as a deposit made on the first day of the return period (quarter or year).

• Business energy credits. Credits for making purchases of qualifying fuel cells property, micro turbine property, and solar energy property have been extended through 2016. The business energy credit can be up to $4,000.

These are just a few of the major changes that pertain to small businesses, so be sure to talk to your tax advisor if you have questions about how your small business is impacted.

—Business.gov 

By Hal Rogers    

In bad economic times, good retirement planning is more important than ever. For personal accounts, one of the best opportunities still available comes from Individual Retirement Accounts, more commonly known as IRAs. 

Provisions for IRAs are found in the U.S. Tax Code Section 408(a).  Traditional IRAs were introduced into law in 1974 with the Employee Retirement Income Security Act (ERISA).  Originally limited to people who were not participants in employer-sponsored plans, they became available to all taxpayers in 1981 with the passage of the Economic Recovery Tax Act.  The Taxpayer Relief Act brought us Roth IRAs in 1997. 

Between traditional IRAs and Roth IRAs, the traditional IRA, referred to simply as an IRA, is the more popular. However the Roth IRA is generally considered to be the more advantageous of the two. Subject to income limitations, the traditional IRA allows an account owner to take an income tax deduction for the amount of the contribution in the year of the contribution, and then earnings accumulate tax deferred.  All distributions from the account are fully taxable at the account owner’s ordinary income tax bracket. 

The Roth IRA doesn’t have income limitations on tax deductibility; Roth IRA contributions are not tax deductible.  However, in addition to tax deferral during the life of the account, for account owners who are at least 59½ and have held the account for at least five years, Roth IRAs provide completely tax-free income.

So, which is best, an income tax deduction on the contribution, or tax-free income from the entire account?  This is not difficult to determine if you ask the question a different way: “Would you rather pay taxes on the seed or on the harvest?”  The Roth IRA makes you pay taxes on the seed, but the harvest is income tax-free.

Beginning in January 2010, anyone who earns income can contribute to a Roth IRA.  Contribution limits are the lesser of: 

• Your earned income for the year, or

• $5,000 if you are under age 50, or

• $6,000 if you are age 50 or older.

What’s more important for most individuals, however, is the opportunity to convert a traditional IRA to a Roth IRA.  The advantage of the Roth IRA is that at distribution time it allows tax-free distributions for the life of the account owner, the owner’s beneficiary spouse, and even beneficiary children, grandchildren, and other heirs. 

So where’s the rub?  Funds transferred to a Roth IRA are taxable in the year of the transfer—except for funds transferred in 2010. IRS has taxes “on sale” in 2010 for taxpayers who convert to a Roth IRA.  For this year only, there are no taxes on Roth Conversions.  Instead, half the taxes on the distribution are due for the 2011 tax year (paid in 2012) and half are due for the 2012 tax year (paid in 2013). 

So, what happens if you execute a Roth conversion, and the market subsequently plummets? You have now paid taxes on account values that no longer exist.  Not to worry.  Imagine that you are in a game of Texas Hold ’em.  You have been dealt a hand that looks pretty good, and you place your bet.  But, after seeing two more cards, you discover that your hand hasn’t worked out to your liking at all.  How would you like to be able to not only fold your hand, but get your bet back?

This is exactly what the IRS allows you to do.  It is called a Roth re-characterization.  If you act within a prescribed period of time from the time you executed the conversion, you simply return the money from the Roth conversion back to a traditional IRA and file an amended tax return. The IRS will give you your taxes back.  By the way, after a prescribed period of time, the IRS then allows you to start over and do the Roth conversion again, this time at the lower account values, thus permanently reducing your taxes on the transaction.  My kind of poker!

Timing is important in these transactions; check with a financial or tax advisor who is “in the know” for details to make sure you don’t run afoul of the rules. 

Harold J. Rogers, CFP, CSA, president of Retirement Services, is a registered representative with ProEquities, Inc.  Securities offered through ProEquities, Inc., a Registered Broker/Dealer, Member FINRA & SIPC.  Information is for informational purposes and should not be construed to be specific tax, legal, or investment advice. 

By Al Bagocius    

Starting a new business, especially from your home, creates many challenges and needs for behavioral control. Going from a job situation to a self-employed endeavor, you find unlimited freedom but at the cost of not receiving a paycheck two weeks.

Working out of your home to start a new business has so many distractions that you could fail in a very short period of time.

When I started my own business, I adopted the following fail-safe system. If you incorporate it as one of your planning tools, you’ll find it will help you keep afloat and successful. The system is based on accomplishing a quota of activities that ensures success in as short a time period as possible. The quota is defined as a weekly point goal; I suggest you aim to “earn” 1,000 points each week.

Point values

To tally 1,000 points, you earn points for various types of activities:

• Phone calls, 1 point. However, you only earn that point for each call that results in talking directly to a prospect or customer.

• E-mail, 1 point. These must be directed to the prospect or customer.

• Mailing marketing information to a customer, 1 point. Because mailing is a black hole that too often gets little or no response, its point value is low.

• Account visitation, 10 points. Meeting the customer face-to-face in most businesses is so important that has a value 10 times that of other activities.

• Order entry, 33% of the dollar value of the profit. The calculation for points for order entry should only be made on profit above cost. For example, if the profit on your $1,500 order is $500, the calculation would be: 33% x $500 = $166 (that is, 166 points).

• Invoice to customer, 33% of dollar value of the profit. (Calculated the same way as for order entry.)

• Checks received from Customers, 33% of dollar value of profit. (Same as above.)

The order cycle develops in three stages: order entry, invoicing the customer, and finally cashing the check that is received from the customer. A sales mentor of mine many years ago only defined an order as one in which the customer’s check clears. How right he was.

Too often, new business owners snooker themselves with a false sense of security, counting the money made at order entry and spending accordingly. If you use the point system, however, you will track all of the components of the order cycle each week, and you will have a clear picture of how well you are doing, how well you did in the immediate past, and what you need to do in the near future.

One more thing: Along with maintaining a high activity level to earn points and ensure success, you should also find a way to give back to the community. You don’t earn points for this activity, but it will pay you pay tenfold in the long run. Consider donating products, service, or time to local organizations.

Al Bagocius is owner of A & I Consulting Group: Creative Marketing Solutions, www.aicreativepackaging.com. He can be reached at 904-367-9322 or al@aicreativepackaging.com

By Maxine McBride   

With the current economy, many business owners are re-evaluating their marketing budget and are asking: Is public relations worth the cost?

The short answer: Absolutely! Now more than ever, it is important for your company to be as visible as possible.

The long answer: For years it has been evident that dollar-for-dollar, public relations expenditures generate greater long-term awareness than advertising and have a higher return on investment (ROI). Instead of thinking of PR as a cost, think of it as an investment.

How can you measure public relations and its effects on consumers?

If you are working with an agency, the impact of public relations efforts may be measured in many ways, including advertising value equivalency.

Advertising value equivalency (AVE) is a statistical measurement tool and an industry standard that takes the subjectivity out of public relations. It makes public relations quantifiable by assigning a dollar value to non-paid media coverage, including press clippings and broadcast media. AVE is calculated by measuring the column inches (in the case of print) or seconds (in the case of broadcast media) and multiplying these figures by the respective medium’s advertising rates (per column inch or per second). This final dollar amount is what it would have cost to place the same size advertisement in the same medium.

Generally speaking, the final dollar amount is usually almost ten times more than out of pocket costs.

Another way to measure the impact of your public relations efforts is to discover how your company’s information is reaching your target audience. When potential clients meet with you, ask how they heard about the company. You may prompt them with current campaign initiatives or common outlets such as newspapers, magazines, or online media sources. Evaluating their responses and comparing your best resources will help determine your ROI.

Review your press coverage monthly. Tally how many times your company was mentioned or featured in newspapers, online news sources, magazines, and trade publications. Are your key messages being communicated? Are your press releases being picked-up? While quantity isn’t always equivalent to quality, it is important that your media message is on-target, positive and creating awareness.

Lastly, request reports from your public relations agency showing its monthly results. These reports should detail press releases that were sent to the media, newspaper, or magazine features, media interviews, and media pitches. Savvy marketing professionals track their activities and can generate reports for your review. Use these reports to discuss how to move forward and/or change your marketing campaign.

A process of checks and balances is important in every area of business and public relations is no exception. Using these simple indicators will help to assess and reaffirm that your investment in public relations is well worth it.

Maxine McBride is the president of Clockwork Marketing Services, Inc., a full-service marketing firm that has provided its premier services to clients in Northeast Florida and throughout the United States for more than 15 years. For information about Clockwork Marketing Services, visit www.clockworkmarketing.comor call 904-280-7960.

By Brad Long       

Small-business owners are a special breed, willing to take on financial and professional risks for the promise of building a great enterprise from the bottom up.

By Alan Vinson     

Color is important. Your choice of color in your clothing affects how you feel and how others feel about you.

Whether you are meeting with one of your employees or one of your top customers, you should be aware that what you wear and the colors you choose convey an unspoken message. In these challenging economic times, you should especially be mindful about what your clothing— much like your body language—communicates to clients.

Here are some tips on choosing color for your business attire:

• Navy. Navy is a power color. It connotes authority. When you wear navy, you are perceived as a “take charge” type of person. Use navy suits for opening/closing arguments, public speaking, important presentations, and when it is important for you to be perceived as an expert.

• Earth tones. Earth tones are your “build rapport” colors. These are colors that draw from a palette of browns, tans, grays, greens, oranges, whites, blues, and some reds. The colors, however, are muted and flat and emulate the natural colors found in nature—in the soil, moss, trees, and rocks.  

Wear earth tones to a staff meeting or team-building session or when picking a jury, delivering bad news, or meeting with clients and their families. In short, wear earth tones when you want to appear approachable. Keep in mind that people get the most compliments when they wear earth tones.

• Blue and gray. Blue and gray hues are your loyalty and dependability colors. They are great to wear when you are traveling and are part of the “do everything” color family. Blue and gray are always appropriate.

These colors also convey a good work ethic. Wear blues and grays when you will be meeting with your boss or even your boss’ boss or an important client.

• Black. Black is the most formal of colors. Use it in lieu of black tie or when you want to look cutting edge or fashionable. Like navy, black is also a power color. Wear black when you want to stack the deck in your favor. Think of black when you want to intimidate a competitor or outshine your competition.

• Black and white. Black and white, as well as gray, are confidence colors. Black and white combine to create a good suit for an average day that has nothing special going on. They’re also good colors that you can mix and look like you know how to dress.

• Charcoal. Charcoal creates a rock solid image. It suggests you are a pillar of the community and are trustworthy. Charcoal works well for professionals who work with finance, such as financial planners, bankers, CPAs, and sales professionals.

Whether you are meeting with the CEO of a Fortune 500 company, encouraging your staff, or giving a speech at a meeting, take a look in the mirror to make sure the colors you are wearing convey the right message.

Alan Vinson is owner of J.T. Vinson Co. (www.jtvinson.com), clothiers for men and women. He can be reached at 904-332-8300.