From the October 1999 issue of Startups

Looking for ways your business can save money? One of the best ways to cut costs can be done with something you're already using: the Internet.

Nearly every business with fewer than 100 employees that goes online buys products and services there, according to Cyber Dialogue Inc. The New York City market research firm's 1999 U.S. Small Business Internet Survey estimates nearly 900,000 small businesses placed online orders totaling $19 billion last year--up 67 percent from $11.4 billion a year earlier. "Nearly half of all online small businesses expect to save [money] by using the Internet," says Thomas E. Miller, vice president of Cyber Dialogue.

Entrepreneurs also are finding that Internet savings transcend discounts and deals. By fully utilizing Net capabilities, you can save on supplies, faxing, mailing, advertising, conducting surveys, traveling and especially time. The Net can also help cut the costs of auto insurance, fuel, and wear and tear, and reduce office- and warehouse-space needs.

Janet Attard, president of Attard Communications Inc. in Centereach, New York, takes maximum advantage of the Internet in her business, which provides Web site maintenance, content development and editorial services to business and government organizations. The independent contractors she uses are spread out nationwide, "with virtually all communication online," she says. The Internet makes it easy for her to use independent contractors, which eliminates employee-related costs such as benefits, taxes, overtime pay, payroll, insurance, office space and utilities. "The [contractors] provide their own tools, equipment and offices," she says.

Attard says programs like Net Meeting (http://www.microsoft.com/netmeeting) make it easy for you and your independent contractors or off-site staff to view documents, graphics and the like on a Web site and discuss them online.

Web sites can also slash sales expenses. In a business where customers use the Net, you can direct prospects to your Web site instead of making sales calls across town or across the country. Attard also suggests arming your Web site with a PowerPoint (http://www.microsoft.com/office/powerpoint) presentation, which allows you to do an entire sales pitch online--either live, with the prospect on the phone or on video. "You may eventually have to meet in person, but in the meantime, you've saved sales and transportation costs, as well as time and effort."

Attard offers more advice on cutting costs in her book Business Know How (Adams Media, $16.95, http://www.businessknowhow.com, 800-872-5627), due out this month.

A Kinder, Gentler IRS?

Do you snicker when you hear the words "I'm with the IRS and I'm here to help you"? Then meet W. Val Oveson, who really is with the IRS and who really is there to help you, the taxpayer.

As the first National Taxpayer Advocate, Oveson is responsible for protecting the interests of individuals and businesses. By the time you read this, he will have established a nationwide network of 85 offices responsible for solving problems between taxpayers and the IRS. His office gets involved in cases where delays in handling problems exceed 30 days, where agents threaten to take adverse action against taxpayers, and where taxpayers incur significant costs while awaiting relief from IRS action.

"In fiscal 1998, we resolved more than 270,000 cases, 70 percent of which involved procedural errors and snafus," says Oveson, who was appointed in September 1998 by outgoing Treasury Secretary Robert Rubin. "Most involved audit reconsiderations, misapplied payments and refunds."

Oveson urges entrepreneurs to contact his office "if you can't work out a serious problem at the local level. Often we can take care of it on the telephone. If the matter is outside our purview, we'll direct you to the right office." You can contact Oveson's office toll-free at (877) 777-4778.

During his year in office, Oveson, 47, has already helped create "a kinder, gentler IRS more responsive to and understanding of the needs of taxpayers," he says. "The change has been substantial."

To Market?

Is this a good time to begin an investment program? You bet it is. Not because the stock market will necessarily climb next month or next year, but because delaying your investment efforts may jeopardize hopes for a comfortable retirement. The sooner you start, the better. In your 20s or 30s, you have a great opportunity to watch your investments grow over the years and the luxury of withstanding market dips.

"Initiating an investment plan is difficult when you're starting a business because the temptation is to plow all resources back into the business," acknowledges investment advisor David Young of Wood Young and Co. Inc. in Quakertown, Pennsylvania. "But an investment program is vital. Don't wait for the right moment to enter the market, or you might be sitting on the sidelines forever."

"One of the biggest mistakes a young business owner can make is to ignore the necessity of saving for the future," agrees Chris Walters, vice president and Los Angeles regional manager of Mellon Private Asset Management, an investment and wealth management firm for individuals with portfolios of $1 million or more. "The majority of [a young entrepreneur's] investments should be in long-term domestic stocks; these have historically outperformed other asset classes. Also consider a smaller exposure in international and emerging market funds, which offer diversification and tremendous upside potential for the portfolio. Finally, it would be wise to include large-cap stocks, which could offer more upside potential in the next three to five years."

If you happen to be just starting an investment program, don't fear the market, counsels Young. "Dollar-cost averaging [periodically investing a set amount in a stock or mutual fund] is an effective way of investing without regard to market timing; it softens the effects of market volatility."

As does diversification. "Mutual funds are the best way to achieve diversification, and they allow business owners more time to concentrate on their businesses without worrying about individual stock picks," Walters says.

To avoid sales fees and commissions, look for no-load mutual funds. Many allow monthly investments as low as $50, which can be automatically deducted from your bank account. And talk to your accountant about SEP, Keogh and other tax-deferred plans to help maximize benefits from the significant compounding effect down the road.

On The Lend

By George M. Dawson

Q. I hear a lot about SBA loans. How do they work?

A. Quite well indeed. The SBA makes credit available to small businesses that don't qualify for conventional financing--for example, those companies that are newer, are short on loan collateral or need long-term loans. The SBA works through banks and licensed nonbank lenders [the 7(a) program], Certified Development Companies (CDCs, also known as the 504 program) and nonprofit microlenders.

The SBA is an insurance agent, not a lender. It insures lenders against loan losses, guarantees bonds to finance CDC loans and finances microlending agencies that, in turn, lend to small businesses. (For more on microloans, see "BizScene" on page 10.) Its programs are complex--combining government and lender bureaucracies--but functional.

Some of the rules: Everyone who owns 20 percent or more of the business must personally guarantee the loan. There's also a reverse-means test--in other words, you can be too rich to borrow. Proceeds of the loan should not pay off owners of the business. Financed real estate must be owner-occupied. Loans can't replace excessive cash withdrawals from the business by owners. Only limited amounts of existing debt can be refinanced. SBA loans can't be used to pay delinquent withholding taxes, nor can they be used to fund charitable, religious or nonprofit organizations.

Loan guarantee fees are passed on to the borrower and range from 2 to 3.8 percent of the amount borrowed, plus a servicing fee. Interest rates range from 2.3 to 4.8 percent above prime. You can roll fees into the loan and deduct interest expenses.

The SBA offers a thicket of specialized subprograms designed to help small-business owners with everything from international trade to accessing lines of credit. You can find lots of information at the SBA Web site (http://www.sba.gov).

The lesson is, don't try this alone. Your local SBA office has the names of contact people at local lenders designated as Preferred or Certified lenders. These folks know how to work the system; their loan applications get priority processing from the SBA.

Where else can an established business get 25-year financing to buy its own building with only a 10 percent down payment? Or a new business borrow $5,000 for inventory? Or get a response to loan requests for no more than $150,000 in less than 36 hours? What a deal!

Contact Sources

Attard Communications Inc., (516) 467-6826

Cyber Dialog Inc.,http://www.cyberdialog.com

Mellon Private Asset Management, 4695 MacArthur Ct., 2nd Fl., Newport Beach, CA 92660

Wood Young and Co. Inc., (800) 966-8620, dave@woodyoung.com

Paul DeCeglie (MrWritePDC@aol.com) is a former staff reporter for Journal of Commerce and American Banker.

George M. Dawson (gdawson@txdirect.net) is a small-business consultant and author of Borrowing to Build Your Business: Getting Your Banker to Say "Yes" (Upstart Publishing, $16.95, 800-235-8866). E-mail him your financing questions at bsumag@entrepreneurmag.com