A New Minimum Wage on Federal Contracts?

Minimum WageDuring the State of the Union Address on 28 January, President Obama called for raising the minimum wage for people working on new or renewed Federal Contracts from $7.25 an hour to $10.10 per hour.

What does this mean for you as a Federal contractor?

Particularly for contractors providing staffing services using a GSA Schedule, the initial answer is, very little for now.

  1. It doesn’t change existing law

The President will sign an executive order that gives preference to companies that pay their workers at least $10.10 per hour.  So, while not mandatory, you may see it appearing in RFPs as an evaluation factor.  The President is expected to sign the Executive Order within the coming month.

  1. It would affect a relatively small number of workers.

As you may know, the wages of most hourly workers on Federal Government contracts follow the Wage Determination Rates set by the Service Contract Act.  These rates are updated annually, usually in June.  It is likely that the increase would be reflected in the Wage Determinations published in June 2015 or perhaps phased across a series of annual Wage Determinations.Currently, there are a number of Wage Determination Rates that would be affected for persons working on Federal Contracts in relatively low-wage areas.  For example, in San Antonio (Bexar County, Texas), the minimum Federal Wage Determination Rate for a dishwasher is $7.76 an hour; the hourly wage would increase to $10.10 an hour as the Service Contract Act is updated in 2015.

The increase would only affect contract workers working directly on Federal contracts—Federal billable contracts.  Therefore, if you own a staffing firm that places people onsite at Federal installations, the increase would affect those workers making less than $10.10 per hour when it goes into effect in 2015.  If you have a Federal contract to supply products to the Federal Government, it will not affect the wages paid to your warehouse workers.

The Washington Post (January 28, 2014) estimated that the increase would affect about 200,000 Federal contract workers beginning in 2015 and the following years.

  1. It is not immediate

It will only affect contracts issued in 2015 and later (or renewals of existing ones) and not necessarily affect the out-year pricing of existing contracts, although the Government could seek to modify those contracts, in which case, contractors would be permitted to change pricing to allow them to charge the Government to make up the difference.The situation for GSA Contract holders is directly tied to the Service Contract Act Wage Determinations. If the increase to $10.10 per hour takes effect in 2015, is reflected in the June 2015 Wage Determinations, and you are a GSA Schedule Contract holder, the increase would likely not affect you until 2017, as under the GSA Schedule contract terms, you have up to 2 years to modify your contract to make your pricing reflect  Wage Determinations.

GSA Schedule solicitations may be updated or “refreshed” to include the Executive Order; if that happens, a mandatory modification (what we refer to as a “mass mod”) could be enacted.

  1. It is not the same as an increase in the minimum wage

The increase would only affect persons working directly on Federal contracts; if your contract is affected, you will be given the opportunity to modify your pricing so that you can collect the difference from the Government.This is different from a minimum wage, which cannot be put into place by Executive Order, but can only be enacted through the usual legislative route of approval by both the House and Senate and receiving the President’s signature.  Minimum wage is a matter of labor law and would apply to all workers in private industry engaged in interstate commerce—a very different thing from the proposed $10.10 minimum for Federal Contract Workers

How to Handle Negative Online Comments

Negative ReviewsEven if your business has never been vilified online, you likely know someone who has that can testify to how detrimental negative comments can be. Whether or not the complaints are valid, they’re now on the record for all to see.

When faced with this situation, you have three options. One is to ignore it and hope it goes away. It won’t.

The second option is to respond online by calling out the customer as irrational. Before you do that, know that caustic comments reflect more on the sender than the receiver and there’s really no delete button in cyberspace.

Your third choice, and the one that’s best for your business, is to publicly acknowledge and address the situation immediately. How you go about resolving the issue will make all the difference when it comes to maintaining your reputation and increasing customer loyalty.

Here’s a three-step process to solving the problem.

  1. Don’t remove negative comments. Since it’s likely that others have seen the comments, removing complaints causes more harm and creates unnecessary suspicion. It’s best to respond online by asking the customer to resolve the issue with you offline.

Still concerned about those public posts? Take heart. A recent Harris Interactive survey found that one-third of customers who posted negative comments and received a response from the company ended up posting a positive review after the issue was resolved. Also, around the same number of those customers deleted their original remark. Alternatively, when that unhappy customer is satisfied with how you’ve handled the issue, you can ask them to update their post.

  1. Acknowledge the complaint. Customers want to be heard so allow them to vent. Once the customer has gotten the issues on the table, respond with, “I see why you may feel that way.”

While you may disagree with some points, restate the issue so you’re on the same page and can move toward a resolution. Of note, 96 percent of customers who complain will do business with your company again if the issue is quickly resolved.

  1. Focus on the facts and be grateful for the complaint. When you separate the harsh delivery of the message from the facts, you’re left with a precious gift. Without that complaint, you may never know why great customers suddenly disappeared.

While it’s impossible to please everybody, you can learn to appreciate complaints as warning signs and opportunities to build even stronger ties to your customers.


security breachSmall businesses are increasingly at risk for data theft, also known as data breach.  According to a Verizon 2013 Data Breach Investigations Report (DBIR), organizations with fewer than 100 employees comprised 31% of data breach incidents investigated in 2012.  You can minimize your business’s risk of data breach by taking these essential steps:

  1. Secure sensitive customer, employee or patient data – Store paper files and removable storage devices (such as thumb drives and CDs) containing sensitive information in a locked drawer, cabinet, safe or other secure container when not in use.  Restrict access to sensitive data to those who have a need to know.  Give employees access to only the information they need to do their jobs – whether it’s online or in paper form.
  2. Properly dispose of sensitive data – Shred documents containing sensitive data prior to recycling.  Remove all data from computers and electronic storage devices before disposing of them.
  3. Use Password Protection –  Password protect your business computers – including laptops and smartphones – and access to your network and accounts.  Require employees to have a unique username and a strong password that is changed at least quarterly.
  4. Control physical access to your business computers – Create user accounts for each employee to prevent unauthorized use of your business computers.  Laptops can be easy targets; make sure they’re locked in a place when unattended.  Also limit network access to computer stations located in public spaces, such as the reception area.
  5. Encrypt data –  Encryption helps protects the security and privacy of files as they are transmitted or while on the computer.  Install encryption on all laptops, mobile devices, flash drives and backup tapes, and encrypt emails that contain sensitive information.
  6. Secure access to your network –  A firewall prevents outsiders from accessing your data on your network.  Enable your operating system’s firewall or purchase a      reputable firewall software.  Be careful with free firewall software as it may actually contain a “scareware” that can infect your network.  Allow remote access to your network only through a secure manner such as a properly configured Virtual Private Network (VPN).
  7. Protect against viruses and malicious code (“maleware”) – Install and use antivirus and anti-spyware on all of your business computers.  Don’t open email attachments or other downloads unless you’re sure they’re from a trusted source.
  8. Keep your software and operating systems up to date – Install updates to security, Web browser, operating system and antivirus software as soon as they become available.  They contain “patches” that address security vulnerabilities within the software and are your first line of defense against online threats.
  9. Verify the security controls of third parties that have access to your data – Before working with third parties that have access to your data or computer systems or manage your security functions, be sure their data protection practices meet your minimum requirements and that you have the right to audit them.  Not only do you want to ensure that your customer and business data is secure, but if a breach occurs on their watch, you could still be held liable and may be required to take all necessary steps toward recover – including notifying customers, monitoring credit reports, paying penalties or fines, etc.
  10. Train your employees on your company’s security principles – Last but not least, make sure your employees understand your data protection practices and their importance.  Document your policies and practices and distribute them to your team.  Review your practices regularly and update them as required.  Be sure to retrain your staff as updates are made.


Applying for the HUBZone Program

HUBZone Certification Eligibility Requirements To qualify for the program, a business (except tribally-owned concerns) must meet the following criteria:

  • It must be a small business for its primary NAICS code. Find out if your business is small with the SBA Size Standards Tool.
  • It must meet one of the following ownership and control requirements:
    • Owned and controlled at least 51% by U.S. citizens
    • Wholly owned or owned in part by one or more Indian Tribal Governments or by a corporation that is wholly owned by one or more Indian Tribal Governments
    • An ANC owned and controlled by Natives or a direct or indirect subsidiary corporation, joint venture, or partnership of an ANC
    • Wholly owned or owned in part by a CDC
    • A small agricultural cooperative or a small business concern wholly owned or owned in party by one or more small agricultural cooperatives
  • Except for certain concerns owned by Indian Tribal Governments, all other small businesses must have a principal office located in a qualified HUBZone.
  • At least 35% of all of its employees must reside in a HUBZone. Reside means to live in a primary residence at a place for at least 180 days, or as a currently registered voter, and with intent to live there indefinitely.

Firms that are owned in whole or in part by Indian Tribal Governments or corporations wholly owned by Indian tribal Governments, at the time of application must either:

  • Maintain a principal office located in a HUBZone and ensure that at least 35% of its employees reside in a HUBZone; or
  • Certify that when performing a HUBZone contract, at least 35% of its employees engaged in performing that contract will reside within any Indian reservation governed by one or more of the Indian Tribal Government owners, or reside within any HUBZone adjoining such Indian reservation. A HUBZone and Indian reservation are adjoining when the two areas are next to and in contact with each other; and the concern will “attempt to maintain” the applicable employment percentage stated above during the performance of any HUBZone contract it receives.

The HUBZone office has a 35% and principal office calculator that you can use to guide you in determining whether you meet these requirements. Before you use it, review the Certification FAQ.

 The Application Process

  1. Review the HUBZone Primer (transcriptDownload Adobe Reader to read this link content) and Certification FAQ  .
  2. There are several important registrations that must be completed before you can start the electronic application process:
    1. DUN & BRADSTREET: Each headquarters and branch office must be registered so that it will have its own D&B ID number known as a Data Universal Numbering System (DUNS).
    2. System for Award Management (SAM): the firm’s Employer’s Identification Number/Tax Identification Number (EIN/TIN) must be registered. (NOTE- the principal office address that is applying for HUBZone certification must be entered in the SAM profile associated with DUNS appropriate for this specific physical location.).
    3. Dynamic Small Business Search (DSBS), aka, SBA’s supplemental page: DSBS profiles will reflect each firm’s certification status. It is recommended to keep your profiles (SAM and DSBS page) up to date through the SAM website.  At the SAM Web site, simply update your SAM profile and SAM will update the DSBS profile. (NOTE: edit updated data transferred from SAM to DSBS usually takes up to 24 hours after you have updated the SAM profile.)
    4. General Login System (GLS): you must complete registration in this system for each individual that can update information to your concern. Once you have registered, then you must add the concern’s DUNS and EIN number(s) andobtain access to the HUBZone application module.
  3. Review the list of supporting documentation you will need to submit to your Business Opportunity Specialist after submitting the online application. See the supporting documentation request for detailed descriptions of acceptable versions of these documents. We have also provided a checklist Download Adobe Reader to read this link contentto make it easy for the firm to ensure it has collected all required documents.

You are now ready to Apply for the HUBZone Certification Online.

How to Estimate the Cost of Starting a Business from Scratch

How much does it cost to start your own business?

Of course, the answer depends on your business model and your chosen industry. However, a useful estimate based on a 2009 study conducted by the Ewing Marion Kauffman Foundation  puts the average cost of starting a new business from scratch at just over $30,000.

Many small businesses, particularly freelance, online and home-based businesses come in a lot lower than this, often needing only a few thousand to get started.

But averages aside, what can you do to calculate your specific start up costs? Read on.

Understand the Types of Costs a Start up Will Incur

Before you do any estimating it’s important to understand how start up costs are categorized. All start up costs (meaning the period before you start generating income) include two kinds of spending: expenses and assets.

  1. Expenses – These are the costs for operations that occur during the start up phase, although they will continue throughout the life of the business. Start up expenses include deductible items such as travel, payroll, rent, office supplies, marketing materials, etc. Expenses also include initial organizational costs like legal fees, state incorporation fees, etc. You can write off up to $5,000 in business start up costs and another $5,000 in organizational expenses in the year that you start a business.
  2. Assets – Also known as capital expenses or expenditures, these are the one-time costs of buying assets such as inventory, property, vehicles, or equipment as well as making upfront payments for security deposits. These start up assets don’t usually qualify for deduction, however, some can be written off through depreciation at tax time.

You can read more about the difference between these two and why it’s important to keep good expense records in SBA’s Small Business Expenses and Tax Deduction Guide.

Define What You Need to Spend Money On

To estimate your start up costs, start by creating two lists – one for your start up expenses and one for your assets. Your list should be informed by the aspects of your business that will have costs associated during the start up phase, such as facility improvements or the equipment and inventory you need. But don’t forget to consider items such as brochures, business cards, and website development costs or any security deposits you need to make.  Do you need the help of a consultant, tax advisor or lawyer to help you get started?

Next, categorize these items as essential or optional – do you really need to spend money on these before you start making any kind of income?

Assign Costs

Now we come to crunch time – assigning costs to your start up “to do” list. This process is always going to be a best guess, but be realistic and use past experience, research, and advice from other entrepreneurs to guide your cost estimates. Organizations such as SCORE and your local Small Business Development Center can provide no cost and valuable advice about how to calculate your start up costs.

If you use a smartphone, another option that you might find useful is the SBA Mobile App which includes a handy tool for calculating start up costs.

Whatever you do, don’t underestimate your costs, or try to force your costs to fit the amount of money you have available. If the costs are too high, consider another approach to starting a business.

It’s All in the Timing

Remember, as mentioned above, start up costs are accrued before you have income to supplement your business. So develop your budget with this in mind. For example, start up expenses such as rent and payroll are only that until your business is operational, once you reach that point they become running expenses that you take out of your profits as deductible against your taxable income. So you may want to delay some of your depreciable costs until your business is up and running.

5 Ways Your Business Could Be Unintentionally Infringing on Intellectual Property

CaptureIntellectual property is a unique legal concept that grants ownership rights over novel ideas, creations, artistic works, brand identifiers and more. Much like a landowner has the right to prohibit trespassers from entering or occupying their property, intellectual property owners have the right to prohibit the unauthorized commercial use of their brainchild.

Civil damages and penalties arising from the unauthorized commercial use of intellectual property can financially obliterate a small business, whether or not infringers knew they were doing anything wrong. Therefore, understanding the nuances between different intellectual properties and the rights they confer can be imperative to the survival of a cash-strapped small business.

But before we delve deeper into this bottomless abyss of legalese, it is important to summarize the three different types of intellectual property:

  • Copyrights protect creative works of authorship, such as drawings, pictures, articles, videos, books, musical compositions, software, etc.
  • Trademarks protect business names, slogans, logos and similar marks that carry a “likelihood of confusion.”
  • Patents grant inventors a limited monopoly to reproduce a useful and non-obvious invention in return for full public disclosure of the invention. A patent can include a unique process or method, a machine, a tool or even a chemical composition.

Now that we have a basic understanding of the different types of intellectual property, let’s examine the most common ways small businesses unintentionally infringe on one of these three protections and how your business can prevent it.

1. Using a Picture Without Permission

Small businesses often scour the web for images to use in print advertisements, brochures, coupons and websites. Many business owners fail to realize that pictures on the web are often copyrighted, and using them without permission can result in hefty fines up to $150,000.

Popular image-based websites, such as BuzzFeed, have recently been sued for using copyrighted pictures without permission. For example, photographer Kai Eiselein alleges that BuzzFeed used his picture of a soccer player without permission, demanding a whopping $3.6 million in damages. Although it is unlikely that Eiselein will recover the entire $3.6 million, he will probably garner a sizeable amount.

There is a common misconception that using copyrighted material is acceptable as long as you give credit to the original copyright owner. This is not true, and merely giving credit to the copyright owner may not be enough to prevent infringement. “Credit” is different than “permission.”

To avoid such issues, small businesses have a few different options. The safest option is to obtain permission by receiving a license from the copyright owner. Ideally, a license agreement should be in writing to minimize misunderstandings and disagreements that often arise from verbal licenses.

Small businesses can also utilize Public Domain sources whose copyrights have expired. Another source is Creative Commons, which features some media with licenses that allow for fair use, but Creative Commons has recently beenunder fire over copyright issues, so even in these cases, it is best to contact the copyright owner to receive direct permission. The last option is to abstain from third-party media altogether.

2. Using a Business Name Similar to an Existing Trademark 

Trademarks not only prevent the same name, slogan or logo from being used by a different business, but they also prevent names that carry a likelihood of confusion with an existing trademark. Likelihood of confusion occurs when two trademarks are similar and the two companies offer similar goods or services, leading consumers to believe that they come from the same source. Thus, similar trademarks can peacefully coexist if they offer unrelated goods or services unlikely to cause marketplace confusion.

A few years ago, a small bakery named “My Dough Girl” was essentially forced to change its name after Pillsbury, the conglomerate responsible for the famous “Doughboy” mascot, claimed it was too similar and could cause confusion in the marketplace. In a similar case, women’s clothing retailer Victoria’s Secret forced a small business named “Victoria’s Little Secret” to change its name because there was a likelihood of harm to Victoria’s Secret popular trademark and brand.

Before your small business invests capital in marketing and promoting a business name, logo or slogan, it is prudent to check both the same and similar trademarks within the your business’ industry to avoid any potential conflicts that may force you to start again from scratch. This article can provide guidancefor conducting a word or mark search.

3. Using a Song Without Permission

Like images, musical and lyrical compositions enjoy copyright protection. It might sound like a good marketing ploy to use a famous song or jingle to help promote your company’s offerings, but it could lead to possible lawsuits and hefty fines. Again, simply giving credit to the musical or lyrical composer will not be enough to protect your business from liability.

GoldieBlox is an up-and-coming company aimed at inspiring little girls to innovate and build with uniquely manufactured engineering and construction toys. One of its promotional videos used a copyrighted song by famed 1990s rap group the Beastie Boys without permission. GoldieBlox claimed that the ad was a parody and the use was protected by copyright’s “fair use” doctrine. This, however, wasn’t the case, and the Beastie Boys and GoldieBlox eventually reached a settlement that required GoldieBlox to issue a formal apology and to make a donation to a charity of the Beastie Boys’ choice.

4. Using a Celebrity’s Name, Picture or Likeness Without Permission

A hybrid intellectual property and torts concept called the “right of publicity” grants individuals the right to protect their name, picture and likeness from unauthorized commercial use. Many states have codified the right of publicity with statutes, while other states offer protection through common law. This concept not only protects a celebrity’s name and picture, but also prohibits impersonators that exploit a celebrity’s likeness.

Maroon 5 lead singer Adam Levine brought suit against video-game producer Activision for using his likeness in a game called “Band Hero” without his permission. The suit claimed that, although Levine allowed Activision to use his name and song in the game, he did not allow Activision to use an avatar with his likeness that sang songs from competing musicians. Levine claimed that he would not have allowed such use if Activision sought permission.

In another case, Bette Midler famously won a verdict against Ford Motor Company for using an impersonator that exploited Midler’s distinctive voice. The appellate court concluded that an individual’s voice is part of their identity and it is unlawful to imitate a voice without permission. So the next time you’re creating a new commercial or company video, be careful about impersonating a celebrity or public figure.

5. Allowing Employees to Illegally Download Music, TV Shows or Movies 

This may not be immediately apparent, but your business could be liable if employees download copyrighted music, TV shows, movies and software while at work. Two different legal theories could make your business liable for such infringement. In one such theory, contributory copyright infringement occurs when your business turns a blind-eye to employee copyright infringement. In the other, vicarious liability could make your business liable as long as the employee is acting in the “course of employment.”

Increasingly, businesses are allowing employees to listen to music while at work. If this is a perk at your organization, it is vital to ensure that they are listening to music through a legal intermediary that does not infringe on copyright. To help ensure compliance, enforcing an internet use policy could be helpful to inform employees of your business’ expectations. However, simply distributing a policy will not insulate your business from legal liability. You must continually police employees’ internet use to ensure no infringement is occurring.

Better Safe Than Sorry

If there is one thing you take away from these examples, it should be that it is better to be safe than sorry. If you are unsure whether using a picture or song will result in infringement, err on the side of caution, and simply abstain from using it. A single case of infringement can debilitate your business, and using protected material is never worth the risk of financial ruin.

The Three Most Common Pricing Mistakes

pricingAll the years I’ve been following business, strategy and small business—from the late 1970s through today—I’ve always wished for a magic formula for proper pricing. What’s the right price for this service? How should you price a new product? In teaching, writing and answering emails, this question comes up all the time. And, much as I’ve looked for the right answers, they aren’t at the back of the book.
Pricing is magic. There is no formula that works for you, or me, or any generalized group. You set your pricing as a matter of situation, strategy, costs, competition, weather, instinct and all of the above.
While I can’t really tell you how to set your pricing right, I can at least share something that I’ve learned—in classrooms, in making mistakes, in growing my own company—about how NOT to set your pricing.
Here are the three most common pricing mistakes that I see. And, just to be clear, while I wish I could drum up some rigorous research to back me, this is based on anecdotal evidence, common sense, and three decades of dealing with business problems.
1. Trying to be the lowest price provider
One of the most damaging clichés in business is the idea that the lower price gets the highest volume. The whole lower price equals higher volume idea, a fundamental law of economics, is for undifferentiated commodities, not your business or mine.
Successful lowest-price strategies are unusual. They usually take a lot of capital, resources and visibility. What works for Costco and Walmart doesn’t work for the corner store, some discount airlines and gasoline stations, but those strategies usually require a lot of capital and very large scale implementation.
2. Mixing your pricing message
We forget way too often—and too soon—that price is the most powerful marketing message you have. Do you think people don’t buy your work because it’s too expensive? But isn’t it worth it? Don’t you believe in it? It’s about positioning. How are you different from the others? Is what you sell better than the one across the street? Does your price say so?
Would you get a root canal from the cheapest dentist in town? Would you save money by buying two-day-old sushi? And why isn’t the cheapest car made the most popular?
I lost a consulting job I really wanted once when I bid $25k for it and a competitor bid $75k. The guy who gave me the bad news told me everybody liked my proposal, but they wanted the best, so they went for the higher price.
What would you rather have for dinner: a $1 hamburger or a $20 steak? We used to go to a restaurant that had really good food and surprisingly low prices. But I often wished they’d raise their prices so we didn’t have to wait 45 minutes or more to get a table. And guess what: they no longer exist. They went out of business. Do you think pricing had something to do with that? I do.
3. Underestimating real costs
Businesses go under when they run out of money. The research on how they run out of money is confusing and ambiguous, and there are rarely single identifiable causes. Still, just betting on what I’ve seen with my own eyes through a lot of years, I think businesses frequently run out of money because they underestimated real costs.
We talk a lot about gross margin in business analysis. That’s your selling price minus your direct costs. So if you buy that widget for $2 and sell it for $6, then the gross margin is $4, and your gross margin percent is 67 percent.
Unfortunately, focusing just on gross margin isn’t enough. Aside from the $2 you paid for that widget, there are all those other expenditures, including your rent, your payroll, your insurance, your electric and water bill, all of your marketing costs, and lots of hidden costs, like the computers and software you’ll need to buy next year. We call that overhead and tend to forget it. Which is a shame, because a lot of businesses forget about it all the way to the business grave. You run out of money.