By Ashley Feit    

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

Debbie Burgess

 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 nnique 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.

If coping with the “normal” problems of a sluggish economy weren’t enough, small business owners have another concern to be weary of—litigation. Employees who have been laid off are turning to the courts to find recompense by filing discrimination and wage and hour claims in record numbers, said attorneys Nancy A. Johnson and Scott S. Cairns of McGuireWoods LLP (www.mcguirewoods.com) in a recent workshop sponsored by the law firm.

In 2008, the Equal Employment Opportunity Commission (EEOC) received the largest number of claims ever—95,402, which was 13% higher than the previous high in 2002, and every category of discrimination experienced a double-digit percentage increase from 2007 to 2008.

Scott Cairns

Age discrimination claims went up 29% from 2007 to 2008, said Johnson. Retaliation claims increased 23% from 2007 to 2008. “Retaliation is the most dangerous type of claim,” said Cairns, explaining that people are human, and it can be hard not to let employee allegations taint judgments, or at least to convince a jury to believe that judgment was untainted.

In addition to discrimination claims, wage and hour claims—that is, claims concerning unpaid or underpaid overtime or working off the clock—are also on the rise, with a 77% increase since 2004. Alleged job misclassification—erroneously classifying an employee an exempt from overtime

Nancy Johnson

 provisions and therefore not paying that employee overtime —is one of the most common types of wage and hour claims, but claims concerning falsified time cards are also common and are increasing.

The reasons for increased activity in employment claims are believed to be directly related to the recession. More terminations, demotions, denials of promotion—in other words, adverse employment decisions—create a greater risk for disgruntled employees to lodge complaints. Also, when workers are unemployed for long periods of time with little prospect of gaining employment, they look for other means to acquire money and take a harder look at available remedies which might otherwise not be worth pursuing.

Cairns explained that often terminated employees rush to an attorney with allegations of discrimination not necessarily knowing if it was discrimination or not. “Even if people don’t have a discrimination claim,” said Cairns, “an attorney they consult may convince them that they have a [wage and hour] claim.”

How to avoid litigation

Florida is an at-will state, explained Cairns, but that status does not give employers the freedom to do whatever they want. All employment decisions should be made with care to avoid inviting litigation down the line.

Johnson and Cairns outlined a number steps small business owners can take to ward off claims:

• Review each layoff or termination decision. Always use objective and measurable criteria before terminating someone, and document the decision process. You don’t have to tolerate poor performers, said Cairns, but document feedback and decisions.

“One of my clients does not permit any termination on the spot,” he said. “The supervisor can put an individual on leave with a recommendation to terminate. This gets the employee off site and gives the company time to examine the termination decision.”

Best bet: Consult an attorney before making any decisions. This is especially important if you are terminating employees who are in a minority in terms of a protected class such as race, gender, religion, age (at least age 40) or disabiltiy.

• Examine exempt job classifications. The Fair Labor Standards Act (FLSA) defines exempt and nonexempt positions. Make sure you have employees classified properly.

“It’s the exempt classification that gets you into trouble,” said Cairns. “I recommend every employer take a look at exempt classifications. This isn’t that hard, because if you have 100 jobs, you probably only have five or six jobs that need to be reviewed. Remember, though, that it’s not the job title; it’s the duties that affect exemption.”

“If you find you’ve made a mistake in classification, you want to correct it as soon as possible,” said Cairns. “The Department of Labor can be cooperative if you are trying to fix things.”

• Review your timekeeping procedures. Make sure you keep records of hours worked for each nonexempt employee—even if you pay them a salary.  

• Train supervisors in appropriate timekeeping. Do not tolerate working “off the clock” or any other falsification of time cards.

Scott S. Cairns is a partner with McGuire Woods in Jacksonville. He can be reached at scairns@mcguirewoods.com or 904-798-3223. Nancy A. Johnson is an associate. She can be reached at njohnson@mcguirewoods.com or 904-798-3234.

 SIDEBAR

Beware of theft

Employees are human, and when fear of layoffs or other economic stressors weigh on them, they may resort to “getting back” at their employer by whatever means they can, such as by taking things that don’t belong to them.

“People almost always take something with them when they leave an employer,” said Cairns. Generally, they steal by taking:

• Property and/or products. They may take things that don’t belong to them, from stationery supplies to laptop computers.

• Money. They may embezzle, take cash, accept illegal kickbacks, or even falsify sales transactions.

• Company data. Company data is particularly difficult to control today, since people can download databases and customer files onto an inexpensive thumb drive or a Blackberry.

• Time. They stop working but don’t clock out.

To anticipate theft:

• Do thorough background checks prior to hiring;

• Put into place controls on merchandise, cash, and assets that can be converted into cash;

• Perform audits;

• Talk to employees about the situation and let them know what steps are being taken.

By Bob McKenzie    

New businesses know they must have an accountant, insurance agent, attorney, and other business advisors to operate their businesses efficiently. The often missing piece of the management team is the human resources expert, usually because hiring a full-time HR specialist is not cost-effective.

Unfortunately, if you don’t comply with governmental regulations you place your company in a position of risk of lawsuits and government fines. Fortunately, maintaining compliance is not difficult. Once you “know what you don’t know,” you can fix your greatest risk problems—negligent hiring, I-9 documentation, new hire reporting, and wage and hour compliance.

Negligent hiring

Don’t jeopardize your business with negligent hiring, which can occur if you hire someone who has a criminal history of theft or violence and put them into a position of trust involving customers. If that employee steals from a customer or commits a violent act on a client, your company may be liable for negligent hiring.

For example: A small business owner wanted to hire a computer technician, who would be required to go into customers’ homes and businesses to set up and repair computer systems. The business owner made a conditional offer of employment to the technician, and then ran a criminal history background check. The background check found that the applicant had convictions for domestic violence, kidnapping, employee theft, violations of his probation, and several other charges. Needless to say, business owner rescinded the job offer and dodged a major bullet.

To protect yourself from negligent hiring:

1. Have the applicant complete a job application. Be sure the application answers all questions about convictions.

2. Interview the applicant. Take at least 30 minutes to talk to the individual and ask open-ended questions that elicit responses from the applicant.

3. Do reference checking. Make a reasonable attempt to call past employers for references and document what they tell you.

4. Run a criminal background check on the applicant. This is best done before offering the applicant a job. To reduce your liability for negligent hiring, the state of Florida recommends a minimum of a Florida Department of Law Enforcement (FDLE) check, which can be done online at https://www2.fdle.state.fl.us/cchinet/ or through a reputable background screening company. It is recommended, that you check an applicant’s background for the last seven years, including a check in other states where he or she lived.

If the job requires the employee to drive a vehicle, check the driving record of the applicant. If the driving record does not meet your minimum standards, then the applicant is not qualified for the position.

I-9 documentation

According to the Immigration Reform and Control Act of 1986, employers can hire only individuals who show proof of eligibility to work in the United States. Proof of that eligibility is a review of certain documents and the completion of an I-9 form, which you are required to keep on file. Examples of eligibility documents include a U.S. passport or permanent resident card or a combination of documents, such as a driver’s license and Social Security card. (The full list of accepted documents is listed on the back of the I-9 form.) 

I-9 documentation is enforced by the Department of Labor and the Immigration and Custom Enforcement (ICE) offices. The fine for non-compliance is $1,000 for each missing I-9 form. Since it takes no more than two minutes to complete the form, there is no excuse for not having these on file. ICE is hiring an additional 600 investigators to randomly inspect I-9 forms. The newest version of the I-9 form is available at www.uscis.gov/files/form/i-9.pdf. Learn how to complete the entire form. If there are questions, contact an HR expert.

New hire reporting

Whenever you put someone on your payroll, you must report that hire to the state. The reason for this requirement is to track individuals who have not paid child support. Again, this is an easy thing to do and the information on how to do this is available at http://newhire-reporting.com/FL-Newhire/default.aspx.

If your business is using a payroll service, the service usually does this reporting for you. If you do your own payroll, make sure you report new hires to the state. The reporting can be done online or via fax. Just make sure to do it.

Wage and hour compliance

Nearly half of the wage and hour lawsuits filed in the United States originate from the state of Florida. The Wage and Hour Division of the Department of Labor (DOL) estimates that 75% of the companies in the country are in violation of the wage and hour laws. With smaller businesses, that percentage is probably closer to 90%.

Personal injury attorneys seeking to increase their business are also aware of the high rate of noncompliance and are now advertising on television. Their commercials ask, “Are you not being paid for overtime when you work more than 40 hours a week?”

Compliance with wage and hour laws, known as the Fair Labor Standards Act (FLSA) is critical for every business, and virtually all organizations are bound by its regulations. Unfortunately, this law is complicated and misunderstood because of its many rules and exemptions.

To help unravel some of its mysteries and avoid wage and hour violations, here are some guidelines to staying out of trouble:

1. Salaried employees must be paid at least $455 per week. If they are paid less than that, they must be paid on an hourly basis.

2. Putting an employee on salary does not automatically make an individual exempt from overtime. FLSA specifies that duties determine if an employee is exempt—not being on salary or having a job title (such as “manager” or “supervisor”). (See www.dol.gov/esa/whd/regs/compliance/fairpay/fs17a_overview.htm, a basic overview of determining exemption status.) If you are audited, the wage and hour investigator will review the work that is actually performed to determine exemption status.

3. Do not dock exempt employees for hours not worked within a workday. For example, if an exempt employee leaves an hour early, you should not dock her pay for that hour. However, if you have a paid time off program, you can charge the time off to the employee’s sick, vacation or paid time off bank.

4. Do not let nonexempt employees work “off the clock.” Employees who clock out because they know they are not allowed to work overtime and then go back to work to finish a job are not doing you any favors. Make sure your employees get paid for all hours actually worked.

5. All overtime over 40 hours in a workweek must be paid—even if it is unauthorized. If an employee works unauthorized overtime, he/she must be paid for the extra time worked even though it was not approved. However, you can discipline the employee for working the extra unauthorized hours.

6. Don’t let nonexempt employees eat lunch at their desks. Nonexempt employees who eat lunch at their desks and answer phones or do other work while eating are considered working. They must be paid for their time.

7. Make sure employees record all hours actually worked.

8. Piecework does not exempt employees from overtime compensation.

9. If nonexempt employees are required to attend training programs, they must be paid for the time spent in the training.

10. Nonexempt employees who must travel must be paid for the time traveling from one job to another. Time spent traveling to work or to a work site is not paid, but if they are required to travel after getting to work, that time is paid travel time.

11.  Florida does not require you to give breaks to employees 18 years of age or older. Therefore if an employee works through a lunch break, it is counted as time worked and there is no violation of any law.

These are just the basic wage and hour laws. The bottom line is that the HR compliance is becoming increasingly complex. In this world, what you don’t know can hurt you. To ensure you are in compliance, have an audit done by a human resources expert. Fix the things that need to be fixed and then you will have one less thing to worry about and the peace of mind a government official knocks on your door.

Bob McKenzie is president of McKenzieHR, www.mckenziehr.com, a full-service human resources management firm. He can be contacted at 904-861-2903 or by e-mail at bobm@mckenziehr.com.

By Rick Arthur     

Is your bank a friend—or a foe? The lending practices of banks is a topic of concern to all small business owners—especially during economically trying times. But if you understand how banks do business, you can take steps to make your banker your financial friend, not your enemy.

As providers of the capital small businesses need to grow or expand, banks are cautious about how they lend their money, particularly in today’s economy. How do they determine who gets a loan and who doesn’t? Essentially, bankers follow the guidelines of the five C’s affecting credit:

1. Character. Yes, character counts. The bank checks your business’ credit report. It looks into your past decisions as well as into what results those decisions have yielded. The bank wants to know the personal and professional background of the owners and managers on your team and how well they relate to financial and business management. To assess this, they look into how well you and the team have handled your financial affairs in the past.

Although “character” is the most subjective of the five C’s, you can influence this evaluation by reviewing both business and personal credit reports, preparing bios for owners and key managers, and providing both business and personal references.

2. Capacity. The bank looks at your company’s past performance and future forecast to make a determination if it has the capacity to repay the loan within the term requested. As the bank does an analysis of financial statements, it pays particular attention to past, present, and forecasted cash flow and profitability. It reviews all of the numbers from all perspectives and validates figures. Because of their importance, financial statements should be professionally prepared. 

In today’s lending environment capacity has become the most critical component in the lending formula: the ability to repay the loan from future cash flows. The company will need to submit two years of tax returns both company and personal; two years of financial statements plus the most recent financials. Although the bank will prepare its own forecasted cash flow analysis, it is important to include your own version to the bank.

3. Collateral. The bank protects its money by asking for collateral, which are generally assets of the company requesting the loan. Collateral is almost always deemed to be a secondary form of loan repayment and will be based on discounted values of the underlying collateral. Because your bank needs to know the value of the collateral, you will need to provide documentation to support the balance sheet value (for example, accounts receivable—an aging report by customer and inventory—a detailed listing by item for both cost and market value). If the collateral is real estate or machinery, an independent appraisal of value may be requested by the lender. 

4. Capital. The bank wants to know if you, the owner, have risked your own resources by investing in the business. In the process of determining your credit, it validates your business operations to determine if the capitalization currently supports operations and debts and to see if the business has a sufficient buffer to help handle difficult times and/or seasonal variations. 

5. Conditions. The bank prepares a clear assessment of the economic conditions, regional markets, industry situations, and seasonal variations among others that might affect the future success of the business. It is important that the borrower provide their own analysis of trends within their industry and any pertinent local economy information that would influence the banker’s decision. Once this is completed, the bank outlines the terms and conditions under which it will grant a loan.

One of the conditions is almost always the business owner’s personal guarantee. The bank’s business logic is simple: If the owner isn’t able and willing to risk his or her personal assets, why should it put its assets at risk?

Keeping your banker your friend

If you and your business pass muster and the bank grants you a loan, keep it your friend:

• Make the bank your one-stop-shop. In fact, the bank will probably expect more from you than just the repayment of the loan. It will most likely require a depository relationship as well as the opportunity to provide treasury and other value added services. While this is normally a quid pro quo in the banking relationship anyway, it is becoming mandatory in the present banking environment.

• Meet regularly. To keep and maintain the positive relationship you have now developed with your banker, make sure to meet with your banker regularly and keep him or her apprised of the good, the bad, and the ugly concerning your present business position and outlook. If you’re looking to make dramatic changes, make sure your banker is “in the loop.” By keeping constant communication ongoing with your banker, you are assuring him or her that you care about your business, your finances, and their money.

Rick Arthur is a partner with B2BCFO®, www.B2BCFO.com, a CFO firm servicing the needs of businesses with revenues under $75 million. With loans averaging $1.8 million, B2BCFO® partners are helping clients find cash to fund growth and create jobs in today’s economy. He can be reached at rather@b2bcfo.com or 904-477-8957.