Small-Business Answer Book

This story appears in the October 2006 issue of Entrepreneur. Subscribe »

Editor's note: For more answers to your most pressing business questions, visit our Small-Business Answer Desk

Hoping to pull out of a sales slump? Looking to launch your first website, but don't know where to start? Ready to overhaul your company image? Over the next three months, we'll give you the answers to these and other crucial business questions.

Q:I'm seeing a slump in my company's sales. How can I give them a boost?

A: Every company, at one point or another, experiences a sales slump. But the sooner you take action, the easier it will be to increase revenue. Here are four steps to follow to get out of a sales slump.

1. Call on satisfied customers. These are the people you know best; presumably, they're the ones with whom you have the best relationships. Are there additional ways to satisfy their needs, or do they have new needs you can meet? Ask how their business is doing. Is there a way you can help them serve their existing customers or find potential new ones? Once you learn about their problems and challenges, you can come back to them with fresh solutions.

2. Analyze your existing accounts. Different accounts have different sales cycles. Sales may take a week, a month or two years. Sometimes, you get so caught up in landing the big one that you forget about the smaller accounts with shorter sales cycles that can bring money in now. In business, you have to look ahead and think long term. But you also have to take care of day-to-day responsibilities. It's important to keep those factors balanced; don't get so focused on one that you lose sight of the other.

3. Stay on top of business and world news. Always keep in mind how current events might affect your customers. Look for sources that will give you new ideas on how to fine-tune your activities and target your customers more efficiently. Read materials that will help you speak to your customers in their business language. Learn more about how other people grew their businesses. There's always a lot to learn from the successes-and failures-of others.

4. Don't waste time. Be selective about your customers. Don't keep doing business with someone just to keep them in your client base. Some customers are simply not worth the trouble for the amount of business they give you. If an opportunity doesn't meet your expectations, move on.

The best way to pull out of a slump is to keep moving forward. Remember: See the people, sell the people, serve the people. Don't let a temporary slump turn into a slippery slope.

Q:I'm thinking about taking my business online. How do I set up a website?

A: Begin by creating an e-commerce plan. Since you're exploring new territory, including making decisions about technology and marketing, and establishing a new set of vendor relationships, you need a well-thought-out plan to guide you.

First, make a list of possible website names. Type "domain registration" into your favorite search engine, and you'll find a list of companies like Network Solutions and Register.com that can guide you through the proc-ess. For a modest fee ($15 to $70), you can register a domain for two years.

Before getting enmeshed in design details, get the big picture by writing a site outline. A thorough site outline includes five elements: content, structure, design, navigation and credibility.

A variety of hosting companies and website solution companies offer combination web-hosting/website-building packages. Most of them have tools that allow you to build a professional-looking website as part of an all-in-one package sold alongside their hosting services.

When it comes to online sales, your web host can handle your transactions. It can collect orders, handle credit card transactions, send an automatic e-mail to customers thanking them for their orders, and forward the orders to you for handling and shipping. Another option is to buy an electronic shopping cart program so site visitors can complete transactions online.

Here's a checklist to keep you on track as you develop your site.

• Keep your e-commerce strategy in focus.
• Ensure your website loads quickly.
• Put full contact information on your home page.
• Make sure your online message is clear.
• Keep graphics clean and eye-catching.
• Check that your website is free of glitches and dead ends that frustrate visitors.
• Make sure your website meshes with the rest of your business.

Customer Service and Relocation

Q:My repeat business is not what I think it should be, and my customer service may be at fault. How can I measure the effectiveness of my customer service?

A: The key to doing more business with your existing customers, as well as attracting new ones through viral marketing and word-of-mouth, is customer service. Customer service means different things to different companies and in different industries. In some instances, good customer service may consist of no more than a friendly smile and a wave goodbye after the sale. In others, it may involve years of follow-up, technical support, parts and repair service, training, updates and more. Here are some suggestions for finding out what your customers want and what they think about your customer service.

1. Attend trade shows and industry events that are important to your customers. You'll find out what the competition is doing and what kinds of products and services customers are looking for.

2. In some industries, nurturing a social relationship with customers and prospects is effective. Take them out to lunch, dinner, a ballgame, the opera or for a round of golf. In a relaxed social atmosphere, you'll learn the secrets that will allow you to go above and beyond your competition.

3. Stay abreast of trends, then respond to them. Read industry trade publications, be active in trade organizations, and pay attention to what your customers are doing and what they need.

4. Most important, ask for feedback. Survey your customers regularly to find out how you're doing. Send postage-paid questionnaire cards or letters, call them on the phone, or set up focus groups or online surveys. Ask for suggestions, and then fix the trouble areas revealed.

Whatever you do, don't rest on your laurels. Regularly evaluate your product or service to be sure it is still priced, packaged and delivered correctly.

Q:I'm thinking about moving my business to another part of the country. How can I be sure this decision is right for my business?

A: Every year, the grass looks greener on the other side of the fence to many entrepreneurs, so they pull up stakes and move to a new city.

Chief among current reasons for relocation is the need for a suitable work force. Unemployment rates are lower than they've been in decades, and the shortage of workers in some occupations is acute. For firms that need specialized employees, it may be well worth it to relocate to an area where they can easily find these kinds of employees.

When a company is in outmoded or undersized facilities, that's another reason to consider moving. Most businesses start in a small facility and then move to bigger quarters in the same city. On the other hand, cost is a concern in any business decision, and a move can cure-or create-many cost issues. Companies often must compromise between staying close to target markets and choosing the lowest-cost facility.

Depending on circumstances, you may have other financial issues to consider. Large companies often land well-publicized tax concessions worth billions of dollars. Growing businesses rarely receive such perks because incentives are based on the number of jobs the business will create. An entrepreneur, however, may be able to tap a cash-flow windfall by selling a building or land that has appreciated in value, then purchasing or renting lower-cost space.

Quality of life is another issue to consider. Companies evaluating relocation often look at recreational opportunities, education facilities, crime rates, health care, climate and other factors when evaluating a city's quality of life.

In business, as in your personal life, not every move works out. But by looking closely at your reasons for moving and making sure the chosen spot addresses your needs, you'll increase the odds that the new location is the best choice for your business.

Cash Flow and Company Image

Q: My business has some financial leaks. How do I improve my cash-flow management?

A: Top-line sales growth can conceal a lot of problems-sometimes too well. When you are managing a growing company, you have to watch expenses carefully. Don't be lulled into complacency by expanding sales. Any time and place you see expenses growing faster than sales, examine costs closely to find places to cut or control them. The key to managing cash shortfalls is to become fully aware of the problem as early as possible. Here are some tips for using cash wisely.

Take full advantage of creditor payment terms. If a payment is due in 30 days, don't pay it in 15.

Use electronic funds transfer to make payments on the due date. You will remain current with suppliers while retaining use of your funds as long as possible.

Communicate with suppliers so they know your financial situation. If you ever need to delay a payment, you'll need their trust and understanding.

Carefully consider vendors' offers of discounts for earlier payments. These can amount to expensive loans to your suppliers, or they may provide you with a chance to reduce overall costs. The devil is in the details.

Don't always focus on the lowest price when choosing suppliers. Sometimes flexible payment terms can improve your cash flow more than a bargain-basement price.

Prepare cash-flow projections for next year, next quarter and, if you're on shaky ground, next week. An accurate cash-flow projection can alert you to trouble well before it strikes.

Q:My business could use a new look. How do I build a great company image?

A: Establishing a new image starts with a few major moves that need to be replicated throughout your company. They range from the really monumental, such as changing your company's name, to the less significant, such as adopting a new corporate slogan or motto.

If you're in business, your company name is probably one of your most valuable assets. An effective name establishes a strong identity and describes the type of business you're conducting. Name changes can reflect a change in the focus of your company or a change in the market. But you shouldn't change your name on a whim. A name change can cause, at least temporarily, confusion among customers, vendors and suppliers.

To build an image for your business, your company name should become a visual symbol. A logo is a symbol that expresses the company's image and identity. A trademark, on the other hand, is a symbol that's used to stamp the company's identity on its products.

A trademark is a corporate symbol that contributes to the image the company is trying to build. Like a logo, a trademark can be a combination of color, type style and shape, or it can just be shape and color, like the McDonald's golden arches.

There is also a legal side to the term trademark. In the legal sense, a trademark is a form of protection of your corporate symbols from use by unauthorized parties and is filed through the United States Patent and Trademark Office, part of the Department of Commerce.

Using corporate slogans to spur growth is common among America's giant companies. When carefully crafted, they can effectively convey a company's key characteristics to a variety of audiences, from investors and customers to suppliers and job applicants.

The bottom line: Your company's image should be simple and straightforward. Making these basic decisions about your new image and then implementing them carefully in everything you do will go a long way toward establishing a new image for a growing company.

New Technology and Business Structure

Q:My business technology could use an upgrade. Is it time to set up a computer network?

A: It likely is. Many businesses are used to spending as little as possible on technology, but it's important for entrepreneurs to make sure the technology they invest in today can support their needs tomorrow. A solid network foundation that ties all your technologies together cost-effectively supports your company's business processes, increases operational efficiencies, lowers costs, increases security and makes it possible to easily add more advanced technologies as needs arise. A consistent, secure and reliable network foundation can provide many benefits, including:

Anytime, anywhere information access: Employees can securely access company databases from home or on the road, turning what might be "dead" time into productive time.

Flexibility: A solid network foundation allows growing companies to be flexible in their future plans. It can be scaled up as a business grows and new employees are added.

Faster information exchange: A single network foundation provides the opportunity to easily and securely exchange information among employees, partners and clients. Enhanced collaboration can lead to faster decision making, better customer service and, ultimately, increased profits.

The ability to add newer, emerging technologies: A secure network foundation provides the platform your business needs to add VoIP, video teleconferencing from your PC, webcasting and other cost-saving and productivity-enhancing technologies. Your business applications can evolve from simple printer sharing to complex B2B data exchanges and supply-chain management using the same network infrastructure.

Enhanced security: Without a common network foundation, a business may have multiple internet connections and various types of hardware devices-an environment that's extremely difficult to secure. In contrast, a single network foundation is streamlined and consistent, making it much easier to secure. Map your short- and long-term business goals to the network-enabled technologies that can help your business realize those goals. If you weigh the many competitive and financial advantages of a secure network foundation against the costs over time, you'll quickly see the return on investment.

Q:What's the difference between an S corporation and an LLC? How do I select the proper business structure?

A: Of all the decisions you make when starting a business, the most important one is probably the type of legal structure you select for your company. Not only will this decision have an impact on how much you pay in taxes, but it will also affect the amount of paperwork your business is required to do, the personal liability you face and your ability to raise money. Let's take a look at two common forms of business structures, a subchapter S corporation and a limited liability company, to see how they stack up against each other.

Subchapter S corporations, also known as just S corporations, and LLCs possess several similarities: They offer their owners limited liability protection, and both are pass-through tax entities. Pass-through taxation allows the income or loss generated by the business to be reflected on the personal income tax returns of the owners. This special tax status eliminates any possibility of double taxation for S corporations and LLCs.

That's where the similarities end. The ownership of an S corporation is restricted to no more than 75 shareholders, whereas an LLC can have an unlimited number of members (or owners). And an S corporation can't have non-U.S. citizens as shareholders, but an LLC can. In addition, S corporations cannot be owned by C corporations, other S corporations, many trusts, LLCs or partnerships. LLCs, on the other hand, are not subject to these ownership restrictions.

S corporations aren't without their advantages, however. One person can form an S corporation, while in a few states at least two people are required to form an LLC. Existence is perpetual for S corporations. Conversely, LLCs typically have limited life spans.

A few other advantages of S corporations: Their stock is freely transferable, but the interest (ownership) of LLCs is not. This free transferability of interest means the shareholders of S corporations are able to sell their interest without obtaining the approval of the other shareholders. In contrast, LLC members would need the approval of the other members to sell their interest. Lastly, in comparison to LLCs, S corporations may be beneficial in terms of self-employment taxes.

For more answers to your most pressing business questions, visit our Small-Business Answer Desk