Bitcoin for Small Business – Revolution or Racket?

Bitcoin, the newest variation on the e-wallet theme, is making a lot of noise these days. That’s not the jingling of loose change – Bitcoin is strictly a virtual currency – but rather the vociferousness of the arguments for and against this peer-to-peer electronic payment system. A closer look at Bitcoin, together with its pros and cons, is in order.

What’s It All About?

The idea behind Bitcoin first saw the light of day in 2008, in a paper authored by a mysterious individual or group using the pseudonym Satoshi Nakamoto. The motivation was to transfer value remotely via computer, smartphone or tablet independently of any central authority.

As a payment method for goods or services, Bitcoin acts as an alternate form of currency. Unregulated and based on complex algorithms, Bitcoins are seen by some as the wave of the future and by others as the next great American financial disaster in the making.

Small Business on the Bitcoin Bandwagon

Small businesses are leading the way in accepting this new invention, as they have more flexibility to update their processes than larger firms. Many entrepreneurs see distinct advantages in accepting Bitcoin over conventional payment methods.

The High Cost of Getting Paid

Traditional customer payment methods each have their own costs. For example, credit card charges place a heavy financial burden on business owners and approximately one in 100 credit card sales end up as chargebacks – charges disputed by the cardholder for which the merchant takes a loss. While cash may seem a simpler alternative, it must be counted, balanced and physically transported to the bank. It is also something fewer people are carrying around with them these days.

Bitcoin services, however, cost about 1% of sales, in contrast with approximately 3% for credit cards. Transactions may not be simply dissolved by an unhappy customer – a refund process must be requested from the merchant. There is also the additional benefit that Bitcoin currency can’t be casually siphoned off from your cash drawer.

Up to Speed

Bitcoin transactions are faster, meaning you end up with money in your pocket much more quickly than waiting to be reimbursed by the credit card companies. Ultra-portable and simple for consumers to use, Bitcoin also facilitates profitable impulse purchases.

The Cool Factor

Geeks love Bitcoin’s bleeding-edge technology and even those without an advanced degree in Computer Engineering think it’s kinda cool. This cachet may serve as a business advantage, helping a small enterprise stand out from the competition as modern and dynamic in customers’ perception.

Consumers enjoy the ease of buying and selling Bitcoin on the Internet. Payment in land based stores is equally hassle-free; all it takes is a smartphone to scan the retailer-provided QR code.

Too Good to Be True?

So what’s the catch? Still in its infancy, Bitcoin is experiencing growing pains. The currency fluctuated dramatically in value over the past year – soaring from $5 to $266 and back down to $103. Even more alarming, customer withdrawals of Bitcoin funds in US dollars were temporarily put on hold in mid-June 2013 for system “upgrades.”

Money-Transmission Laws

Banking regulators are looking askance at the new currency system, warning that users will be penalized if they breach state money-transmission laws. Senior Counsel Paul T. Crayton of the California Department of Financial Institutions recently warned the Bitcoin Foundation of potential fines of $1,000 per violation or per day for transmitting money without a license.

Last but not Least

One of the simplest but most cogent arguments against gung-ho adoption of Bitcoin is simple – not enough other people are using it. Accepting Bitcoin from your customers isn’t worth a hill of beans if you can’t then turn around and use the currency to pay your suppliers and landlord. True, you can convert the contents of your Bitcoin wallet into dollars for payment purposes, but that detracts enormously from the convenience of the system.

You Be the Judge

So the jury is out on Bitcoin. Weighing the pluses and minuses of this radical new system, you decide whether Bitcoin is right for your business.

Is Economic Policy Uncertainty Affecting Small Business Growth?

Is uncertainty about the direction of federal policy hindering small businesses, causing them to hold back on expanding, hiring, and investing? This very question is at the center of a heated public debate.

According to small business owners, uncertainty and misgivings about future tax and regulatory policies is indeed hindering the recovery of their operations and adversely affecting plans they might have for expansion. Findings from the Small Business Optimism Index published by the National Federation of Independent Businesses reveal that small business owners are not only pessimistic about the economy, but that their pessimism remains at pre-recession levels. Conversely, measures of the same index for large companies exceed pre-recession levels. Leading economists attribute this parity to the reliance of small businesses on the domestic economy. Since small firms are less diversified geographically and productively, they have smaller margins for error; therefore, a weak economy at home weighs more heavily on their operations than larger firms. Furthermore, without a large in-house team of analysts to advise them of current risks, small business owners may be more alarmed by news reports regarding fiscal tightening and the debt ceiling.

Basic economic theory largely concurs with these hypotheses, underscoring the concerns currently expressed by small businesses regarding their inability to anticipate future policies coming out of Washington. As explained in a 1983 paper by Federal Reserve Board Chairman Ben Bernanke, when the future is uncertain, business owners delay costly capital investments and refrain from hiring so as to avoid discovering down the road that they made an erroneous decision. Without knowing whether or how tax and regulatory policies are going to change in the near future, business owners naturally refrain from planning to expand, hire, or invest. Stated otherwise, economic theory predicts a negative correlation between government policy uncertainty and small business plans to expand.

In the current economic milieu, small business concerns include:

  • The short-term and long-term economic security of their operations
  • Effects of tax increases on their bottom line
  • Spending cuts
  • Changes to health care benefits requirements and liabilities
  • Another fiscal blowup in Washington
  • Opening a new office
  • Hiring new employees
  • Availability of financing (i.e. getting a bank loan/qualifying for a credit line)

Adding salt to their wounds and fanning the flames of economic uncertainty, small business owners are increasingly getting turned down for bank loans, with some banks declaring them a “high risk business.” Unable to establish a credit line, some owners turn to cash-advance companies, only to be hit with exorbitant interest rates by lenders.

The facts on the ground are that the recent fiscal deal has done little to eliminate political uncertainty from small business owners. According to recent polls, 70% of small business owners do not trust Washington and do not think that now is the time to expand. Unfortunately, the consequences of their uncertainty only lead to further low economic growth. With small business owners ‘sitting on their hands’ and neither investing nor hiring, the economic outlook appears dismal indeed.

[Comic] A Union and Your Business

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Top Business Blogs for Bootstrapping Small Business Owners

In a previous post, I listed my picks for the top small business blogs. But as the economy continues to sputter along and the credit markets remain tight (especially for small businesses), I wanted to highlight those blogs that are specifically targeted to those small and home-based business owners committed to bootstrapping- those who seek to avoid outside financing, while focusing on how they can use their available resources creatively and efficiently.

(Image Credit)

The following business blogs offer a vast collection of techniques, advice, and knowledge on cost-cutting, raising capital, creative marketing, and efficient operations:

1. SOHO Tools, News & Technology. This blog hosted by Wendy Piersall offers a a collection of ideas, business book reviews, product reviews, technology tips, coupons, and freebies to help the aspiring entrepreneur build and run a business on a shoestring budget.

2. The Entrepreneurial Mind. Hosted by Jeff Cornwall, director of the Center for Entrepreneurship at Nashville’s Belmont University, this blog discusses various topics in entrepreneurism such as, Bootstrapping, Global Entrepreneurship, and Learning from Failure.

3. Toilet Paper Entrepreneur. Mike Michalowicz offers a “get real” approach to starting and running a new business with a collection of helpful tips and resources.

4. Duct Tape Marketing. Hosted by John Jantsch the founder of Duct Tape Marketing, this site focuses on marketing techniques and methodology for small businesses operating on a shoe string. The blog contains insightful articles and commentary by several small business marketing gurus.

5. Neville’s Financial Blog. Follow Neville Medhora as he documents his business goals, strives to increase his net worth, and even conducts “experiments.”

6. The Simple Dollar. The Simple Dollar is an insightful personal finance blog offering advice on managing debt and living cheaper.

7. Productivity501. This site offers an abundance of information and tips and help people increase their personal productivity.

8. Free Money Finance. This comprehensive personal finance blog offers information and advice, commentary, news, resources, tips, and tricks.

9. Wise Bread. Wise Bread is a valuable forum for personal finance including tons of advice on frugal living, consumer deals, as well as a section dedicated to small businesses.

10. How to Change the World. Guy Kawasaki, co-founder of Alltop, offers on practical tips on technology, marketing, and innovation.

11. Vest Pocket Consultant. Blogger Rosalind Resnick offers her expertise and insight in the areas of business planning, finance, and marketing to start-ups and growing small businesses.

12. College Startup. This blog offers advice for entrepreneurially-inclined college students trying to make money while they study.

13. FiveCentNickel. A clear, and highly informative blog about personal finance and general money matters.

14. Mint Life. This blog offers a lot of useful information on personal finance tips, trends, and news.

15. I Will Teach You to be Rich. Ramit Sethi offers advice and tips for saving, investing and negotiating as well as how to live a richer, happier life.

16. Practical Ecommerce. This site offers blogs and articles on a variety of topics affecting online merchants.

17. Gulliver. Gulliver is a valuable source of business travel news, service reviews, and thoughtful discussion

18. Seth Godin’s Blog. This blog written by marketing expert, author, and entrepreneur Seth Godin, is in itself a lesson in branding and image development. It will challenge the way you think about marketing yourself or your business.

19. Small Business Growth Strategies. Blog Hosted by Stephanie Chandler provides thoughtful commentary, advice, tips, and news related to running and growing a small business.

20. The Frugal Entrepreneur. This blog, by Adam Gottlieb, offers a wealth of information, tips, and resources to help the cash-strapped small and home-based business owner. Be sure to also check out Adam’s collection of essential free business forms and templates.

The Top 13 Most Influential Celebrity Entrepreneurs

Does the daily grind of running a small business leave you feeling like you need a little inspiration? Here is a star-studded line-up of the most influential celebrities in business. Some of these pop icons basking in the limelight have used their personalities and business acumen to become successful business tycoons; others are savvy entrepreneurs who used their personalities and business acumen become celebrities.

I complied this list with the aid of a poll conducted by earlier this year as well as the Forbes Celebrity 100.

1. Sir Richard Branson. With his boyish enthusiasm, this English entrepreneur has built an empire of over 360 companies belonging to his trademark Virgin brand. Branson began his business career at the age of 15 with the publication of a magazine called Student. In 1972, he opened his well-known chain of record stores, Virgin Records, that became Virgin Megastores and later zavvi in late 2007. Branson’s Virgin brand grew rapidly during the 1980s to include Virgin Atlantic Airways and expanded the Virgin Records music label. Recent endeavors include: Virgin Galactic where passengers can travel in suborbitol space, Virgin Comics, and Virgin Health Bank.

2. Bill Gates. Though you may question his future as an actor after his recent appearance with Jerry Seinfeld in a series of Microsoft commercials, it is well known that Bill Gates has played a pivotal role in advancement of personal computing. Gates is currently chairman of Microsoft, the software company he founded with Paul Allen. During his career at Microsoft he has held the positions of CEO and chief software architect, and he remains the largest individual shareholder with more than 8 percent of the common stock. He is also well known for his philanthropy. In 2000, he and his wife Melinda established the Bill and Melinda Gates Foundation, which is considered one of the largest charitable foundations in the world.

3. Donald Trump. Trump may be as well known for his bold, flamboyant, and extravagant style as he is for the success of his business pursuits. An American business executive, entrepreneur, television and radio personality and author, Trump is currently the CEO of Trump Organization, an American-based real estate developer, and the founder of Trump Entertainment resorts, which operates several hotels and casinos around the world. In recent years, his fame increased after the success of his reality television show, The Apprentice, that he both hosts and produces.

4. Warren Buffet. Buffet is one of the world’s most successful and well-known investors. Earlier this year Forbes ranked him as the richest man in the world with an estimated net worth of $62 billion. Buffet is currently the largest shareholder and CEO of Berkshire Hathaway and an avid philanthropist.

5. Oprah Winfrey. Oprah Winfrey rose from a life of hardship and adversity to become one of today’s most influential TV hosts and media moguls. She is considered one of the richest African Americans of the 20th century, and earlier this year Forbes ranked her as the most powerful celebrity in the world. In addition to publishing two magazines, she runs her own production company and will soon debut the Oprah Winfrey Network in collaboration with Discovery Communications.

6. Simon Cowell. You may not agree with Simon Cowell’s unapologetically blunt comments and criticisms, but it is hard to deny his fame, fortune, and shrewd business sense. He is currently an A&R executive for Sony BMG in the United Kingdom, a television producer and owner of the music publishing house Syco. Cowell is most well-known as a brazen judge on television programs such as Pop Idol, The X Factor, American Idol and Britain’s Got Talent.

7. Jay-Z. Jay-Z is a prolific rapper who has become one of America’s most financially successful music artists and entrepreneurs. In addition to releasing several acclaimed albums, such as Blueprint and Kingdom Come, he is the former president and CEO of Def Jam Recordings and Roc-A-Fella Records. He also has part ownership in the 40/40 Club and the NBA’s New Jersey Nets.

8. Justin Timberlake. After rising to stardom as one of the lead singers for the boy band ‘N Sync, Timberlake has used his fame and talent to become a successful entrepreneur. His ventures include: the William Rast fashion line, Tennman Records, and co-ownership in three restaurants.

9. Steven Spielberg. Very few in the motion picture industry can claim the kind of longevity and influence held by Steven Spielberg. As director, screenwriter, and producer, his movies have set the standard for Hollywood film making across several decades and many genres. In 1994, Spielberg created his own studio DreamWorks which produced several blockbuster hits, such as The Lost World: Jurassic Park and Saving Private Ryan. Spielberg has also been dabbling in the gaming industry. His first offering, Boom Blox, which he developed in collaboration with Electronic Arts, was released in May.

10. 50 Cent. After rising to the top of the charts with with the release of his two albums Get Rich or Die Tryin’ and The Massacre, 50 Cent established himself as a successful entrepreneur and executive producer. His ventures include the G-Unit clothing line and record label and a vitamin water drink called Formula 50. Last summer, 50 Cent reportedly earned $100 million after taxes last when his stake in VitaminWater parent Glacéau was bought by Coca-Cola.

11.Tyra Banks. Although she has retired from modeling, Tyra Banks’ influence and business sense is going strong. Over the past two years she has devoted herself to her two successful TV programs, America’s Next Top Model and her Oprah-style talk show- both of which are owned in part by her production company, Bankable Productions. Other shows are in the works, such as the reality series Stylista, which will debut in the fall on CW.

12. Mary Kate and Ashley Olsen. Shortly after their joint appearance as Michelle Tanner in the television series Full House, the Olsen twins founded a company called Dualstar and started promoting their own brand. For nearly a decade beginning in the late 90’s, their images could be found on a host of merchandise including: clothes, books, toys, fragrances, and posters. Recently, they have been promoting their new upscale clothing line, Elizabeth & James.

13. Gisele Bündchen. With an estimated $35 million in earnings last year, Forbes named Gisele Bündchen the world’s highest-paid supermodel. Though her striking appearance may be her biggest asset, she has also made herself a name as sharp businesswoman. In addition to her numerous advertising and modeling contracts, a large portion of Bündchen’s income (about $8 million) comes from her own line of sandals produced by Brazilian sandal-maker Grendene. Other ventures include a licensing deal with Luxottica’s Vogue Eyewear and ownership of Brazil’s posh Palladium Executive Hotel.

Image credits: flickr users P*,  Eka Eka, Free Music.1992, My Fav celebs

The Worst Mistakes to Make When Applying for a Bank Loan

At a time when the American economy is reeling from the effects of unfettered credit card debt, housing foreclosures, and price increases on everything from a gallon of gas to a can of tuna, bank loans are fast becoming a shrinking commodity.

According to a recent Federal Reserve survey, the banking world is responding to the economic turmoil by tightening the reigns in the lending department. This comes as sour news to consumers and small businesses in need of additional funding.

With the cards stacked up against many bank loan applicants, I thought it would be a good idea to post a list of some of the worst mistakes to avoid when applying for bank financing.

1. You don’t do enough research. Don’t make the mistake of applying at a particular bank just because it is around the corner from your house. Find out which banks have a reputation for approving the kind of funding you are seeking. Also, don’t be afraid to seek out alternative financing sources, such as credit unions, community organizations, and government programs as well as alternative financing methods, such as home equity lines of credit, accounts receivables factoring, and business cash advances.

2. Your paperwork is unclear or inaccurate. Make sure all the forms and documents that you submit to the loan officer are both clear and accurate. Trying to forge or leave out information that may reduce your chances of receiving the loan can easily backfire leaving you with a bad reputation and without your funding.

3. You provide insufficient information. Make sure you are familiar with the bank’s loan application requirements before you come to the interview. Some banks will ask to see your tax returns, and providing your current credit history and credit score is a must no matter how embarrassing it is! Business applicants will additionally need to bring certain financial statements, such as a balance sheet or income statement.

4. You present yourself and your business as financially or structurally unstable. A general rule of thumb when it comes to bank financing is to try avoid applying for a loan while you are in the process of making major changes in your life or your business. In other words, don’t apply for a loan in the middle of a move or a business restructuring.

5. You present yourself as unorganized and without clear direction. Banks are looking to fund people and ventures that will make them money. Period! Consumers need to be very clear about where and how they hope to spend the funding they receive as well as their ability to pay back the loan. Business owners need to take it a step further by providing a good business plan that details how the business operates, who it caters to, and what plans are in store for the future.

6. You are unprofessional at the interview. Your bank loan interview is just like any other. Make sure to be on time, courteous, and neatly dressed. Pay attention to how you express yourself (it may even be a good idea to rehearse a little before the actual interview). Try to avoid abrasive and vulgar language, and never insult the bank or acting loan officer.

7. Not so fast! The relief that comes with a loan approval may cause you to zip through the remaining paperwork and bank “formalities,” but you might want to pause before you so quickly sign the dotted line. Make sure you are very familiar and comfortable with the bank’s terms and conditions on the loan before you agree to anything. If you have difficulty understanding the legal jargon then take the documents to someone who can explain it to you. There is nothing worse than binding yourself to something you don’t want.

Image credit: Flickr user  filipinoj

How is Your Favorite Business Effecting the Environment?

Climate Counts, a nonprofit organization committed to reversing climate change, recently posted their second annual Company Scorecard . The Scorecard rates 60 leading companies in nine major consumer sectors (Apparel/Accessories, Beverages, Consumer Shipping, Electronics, Food Products, Food Services, Household Products, Internet/Software, and Media) on their practices to reduce global warming.

Each company was ranked on a scale from zero to 100 based on several criteria that fall within four categories: “whether they measure their carbon footprint; what efforts they have made to reduce their own climate impact; whether they support or oppose global warming legislation; and what they disclose to the public about their work to address climate change.”

According to the study, even though eighty-four percent of the companies had made improvements in their efforts to reduce greenhouse gases and to promote those actions to their consumers, several major companies received a score of one or zero.

Here are the best and worst performers:

Top Overall Performers

Nike 82

Stonyfield Farm 78

IBM 77

Unilever 75

Canon 74

General Electric 71

Toshiba 70

Procter & Gamble 69

Sony 68

Hewlett-Packard 68


Worst Performers

Jones Apparel Group 0

Burger King 0

Darden Restaurants 0

Wendy’s Internat’l 0

Yum! Brands 1

VF Corporation 4

Viacom 4 5

eBay 5

Apple 11

For up-to date information and commentary on each business’ commitment (or lack thereof) to the environment, you can check out Climate Counts’ blog.

You can make your opinion on climate change heard through the dollars you spend.

Capitalize on Call Avoidance

This may sound familiar… You need to make a phone call, yet are dreading the possible response. As you are dialing, you hope and pray that the other person won’t pick up –  wouldn’t it be great if you could just leave a message and avoid the whole conversation?

Now, you can!  I recently found out about a new free service offered by Boston-based MobileSphere which helps the more passive aggressive of us to avoid those unwanted responses and sticky conversations. Users can just call 267-SLYDIAL (267-759-3425) followed by any US mobile number – their call will go directly to the recipient’s voicemail.

Though the incoming call is supposed to go undetected, some users have reported that the receiving phone will ring once. (But don’t worry, when the phone is picked up, the line goes dead.) The receiver’s phone will then register that a voice mail message has been received.

This neat service can give the user a tremendous sense of power and control at a time when information overload and hyperconnectivity are considered a normal part of life.

(And anyway… shouldn’t we all be allowed a little avoidance every now and then?)

It is also easy to see how the Slydial service can make its way into the business world. Just imagine the possibilities…

  • You can set up an appointment with someone and skip the awkward or time-consuming small talk.

  • Cancel a meeting with a client or co-worker or call in sick to work without having to delve into the details of your excuse.

  • Discretely contact potential clients or co-workers at a time when you know they are busy.

  • Convey a difficult message to an upset customer while still being personal.

Have any other creative ideas? Post in comments…

Work Decorating No Nos

Whether you have your own business, or just your own work space, here are some good things to avoid when decorating at work:

Uncouth photos. You don’t need to remind your coworkers that there is a much-less-professional side to you. Family photos are great, but avoid swimsuit shots (even if you are hot, but especially if you are not).

Dead/Dying plants. Aside from being ugly, sick plants don’t do much for demonstrating your competence. If you can’t even remember to water a plant, what does that say about your responsibility? Plants are great, but make sure they stay healthy. If they aren’t, take them home until they get better.

Fresh Flowers. As pretty as flowers are, many people have allergies. So, before you sign up for the “boquet of the week”, check with coworkers to make sure that no one has serious allergies.

Clutter/Toys. A few cute items are fine if you work in a “creative environment.” Don’t go overboard. As fun as it seems, it will most likely distract you and make you less productive.

Tacky Posters. Stay away. Stay far, far away.

Work decorating