NY ranks near last in being entrepreneur friendly

December 5, 2009  |  Blunders

This month, the Small Business & Entrepreneurship Council, based in Virginia, ranked New York as one of the least friendly states towards entrepreneurs.  Joining us at the bottom of the list is ironically California which has one of the largest populations of entrepreneurs and therefore start-up companies than any other state. The report evaluates things like taxes, various regulatory costs, government spending, property rights, health care and energy costs Рmany of which are clearly in the benefit of the state and not in the best interest of small business.

In the December 1 media release, SBE Council chief economist Raymond J. Keating, the author of the study, notes: It’s hard to find any good news at the national level for entrepreneurs, small business and their employees. The U.S. economy slipped into a recession in December 2007, with matters getting far worse late last year. Congress and the White House have not offered positive solutions to help the job-creating sector. In fact, most of their actions will hurt, not help, small businesses. But what about the states? The Small Business Survival Index helps business owners and investors understand the public policy burdens placed on entrepreneurship and small business, with the states ranked accordingly.

You would think that with these state’s large fees and penalties towards small business, New York and California would be in better budget situations versus, well, practically broke.

In case if you’re wondering, the top ten entrepreneur friendly states are: South Dakota, Nevada, Texas, Wyoming, Washington, Florida, South Carolina, Colorado, Alabama and Virginia.

Creating an environment that encourages business development and making it easier for individuals to strike out on their own is definitely a risk to most states. And as a small business owner, I do recognize all states have their own versions of trying to encourage affordable small business. For New York, I find their healthcare policy called Healthy NY to be ideal and I remember California having excellent maternity leave.  But it’s still not enough. So for now SMBs, it’s going to be an uphill battle, at least in these two states.

So until a purple elephant crosses the road, (in other words, never gonna happen), here’s what we can learn from Entrepreneur.com’s list of Effective Ways for Entrepreneur’s to Save Money:

Insurance Intelligence

1. Save by association. When looking for insurance, check with your trade association. Many associations offer competitive group insurance.
2. Be prepared. Buying appropriate insurance upfront saves money in the long run, says Jeanne Salvatore of the Insurance Information Institute, a nonprofit organization in New York City. Consider what situations would be catastrophic to your business and protect yourself with adequate insurance. “Disaster recovery,” says Salvatore, “is one area where business owners shouldn’t scrimp.”
3. Make a foul-weather friend. By arranging for an alternative place to run your business in case of a major disaster, you may be able to save on business interruption insurance, advises the Insurance Information Institute. For instance, you could arrange with a firm in the same industry to use their facilities in case of damage, and vice versa.
4. Check up on your medical insurance. Before choosing a medical insurance carrier, ask for information on past claims and the loss ratio of paid claims to premiums, advises the Council of Better Business Bureaus in Arlington, Virginia.
5. Raise your deductible. Raising the deductible on your insurance usually lowers your premiums. Even if you end up having to pay the deductible, it’s likely to be less than the amount you save.

Employee Economics

1. Aim to lease. Employee leasing-in which you turn over your work force to a professional employer organization that leases your employees back to you-can save you substantial cash on employee benefits, says Bruce Steinberg at the American Staffing Association (ASA). For referral to a leasing company near you, visit the ASA online at www.staffingtoday.net.
2. Go with the flow. Rather than paying for employees who sit idle when business is slow, consider hiring temporary employees to handle surges in business.
3. Make experience count. Get free or low-cost help-and give local college students a chance to learn the ropes-by hiring interns.
4. Use independent contractors. Employers generally don’t have to withhold or pay any taxes on payments to independent contractors. But be very careful that your independent contractors fit the definition provided by the IRS or you could face penalties.
5. Commission your sales force. Overhead, salaries, incentives, training costs, fringe benefits and expenses add up when you’re hiring your own sales representatives. Contracting independent manufacturers’ sales reps, paid on commission only, is less expensive-and often equally effective.

Shipping Savings

1. Clean up your mailing list. The U.S. Postal Service will clean up your mailing list for free, correcting addresses, noting incomplete addresses and adding ZIP+4 numbers so you’ll be eligible for bar-code discounts.
2. Prune that mailing list even more. The Direct Marketing Association offers this checklist of cost-cutting ideas. Eliminate non-responders and marginal prospects; print “Address Correction Requested” on the face of your mail; investigate co-mingling your mail with that of other small mailers to take advantage of discounts available mainly to large mailers; and stockpile mail to build up larger volumes.
3. Be an early bird. Send mail early in the day, and you can usually expect to get one- to two-day delivery for the price of a first-class stamp.
4. Shop around for an overnight courier. Overnight delivery rates for the major couriers are competitive; however, if you’re willing to wait a few hours-or even an extra day-you could save.

Tax Tactics

1. Mind some petty pointers. Don’t get careless about your petty cash account. “Though you don’t need receipts for expenses under $75, you should still track these expenses since they can add up,” advises Holmes Crouch, author of 18 tax books.
2. Hire your children. If your children are at least 14 years old and pay their own taxes, it pays to take advantage of their lower tax bracket. “You can essentially transfer income from your business to them [to save money],” says David L. Scott, author of The Guide to Saving Money (The Globe Pequot Press).
3. Take a stand on taxes. If your business is new in the neighborhood, you may be at a higher tax rate than those who have been there longer. “Go to city hall to determine what your neighbors are paying, and use this to negotiate a better rate,” says Pete Collins of New York City-based PricewaterhouseCoopers LLP. “Expanding businesses can often negotiate with community authorities, who want them to stay in town rather than move and take jobs elsewhere.”
4. Homebased? Don’t overlook crucial tax deductions. In addition to being able to deduct a portion of your rent or mortgage interest and utilities as a business expense, you can also deduct a percentage of various home maintenance expenses, along with a portion of the cost of services such as house cleaning and lawn care. Check out the IRS’s Web site, or check with a knowledgeable tax advisor for more information.
5. Get out on the town. If much of your business is conducted at restaurants or you find yourself driving to clients’ offices, make sure you take those deductions. If you entertain clients or potential clients to discuss a current or future project, you can deduct a portion of your entertainment costs. To qualify for this deduction, you must maintain a log of entertainment-related expenses you plan to deduct. For mileage, you can deduct 37.5 cents per mile in 2004. This figure usually changes annually, so check with your accountant at the beginning of each year.

Financial Focus

1. Make credit comparisons. If you tend to run unpaid balances on your credit cards at the end of the month, shop for a card with a low interest rate. If you pay in full, it’s more important to avoid an annual fee and look for a longer grace period. “Often credit card issuers waive the annual fee or reduce the interest rate if you ask,” says Scott. “Just tell your credit card company you’ve had several solicitations from other companies with more favorable interest rates or no annual fees, and ask if they will reduce yours.”
2. Avoid cash advances. “Credit card companies usually charge an upfront fee of up to 2 percent of the advance, with interest accruing immediately,” says Scott.
3. Bank on an early deposit. Make bank deposits early enough in the day so you get credit (and start earning interest) that day.
4. Get checks in the mail. Ordering your checks from a printing company often costs less than getting them from a bank. Options include Checks in the Mail and Designer Checks.
5. Form a buying alliance. Join with another business or a trade association for bulk purchasing discounts.
6. Take it with you. If you’re near your suppliers, pick up your order yourself-or perhaps have a friend or family member do it for you, suggests Sarah Williams Steinman, president of Casco Bay Herb Co., an herbal soap manufacturer in Cumberland, Maine. For example, Steinman’s husband travels throughout the Northeast. “He keeps me updated as to when he might be near one of my suppliers,” she says. “He often travels through the town where my olive oil supplier is, and he’ll pick up a few hundred pounds of oil on his way home. That saves me about $75 in shipping.” Caution: Pick up supplies yourself only when it truly saves you money. If it’s taking you away from a revenue-producing activity, you’re not really saving.
7. Be reluctant to give credit. If you do extend credit, thoroughly check the client’s credit background, says Collins. For less-than-creditworthy accounts, Collins advises considering the following actions: Collect cash in advance; send partial shipments; request letters of credit, personal guarantees and a pledge of assets; take out credit insurance; or think about factoring (see below).

Professional Policies

1. Query your consultants. The professionals you work with regularly are often easy to bargain with, thanks to the rapport you’ve developed with them. Ask your insurance agent, accountant or attorney how you can cut back on their costs. You’d be surprised at the suggestions they might offer on ways to cut your premiums, reduce billable hours or avoid huge retainers. You might also barter your services.
2. Be a legal eagle. When hiring an attorney, make sure you have a written fee agreement to prevent surprises. It should include an estimate of the time to be spent on your case and specify what’s covered in the fee-including typing or copying-and what is not.
3. Learn something new. Rather than pay a consultant to write your press releases, for example, hire one for an hour or so to show you how to do it yourself.
4. Run from the law. “Avoiding lawsuits is a big factor in business success,” says tax book author Crouch. “Even arbitration can get expensive.” The best alternative: Try to work out any problems before they grow to the point that attorneys get involved. “Don’t ignore any written or phone complaints.”

Buying Brainpower

1. Stretch your budget with barter. Swapping one product or service for another is a good way to avoid cash outlays-and unload slow-moving inventory. If you’d rather not bargain with other businesses directly, hire a commissioned barter broker (listed in the Yellow Pages under “Barter”), or join a commercial barter club or exchange. The National Association of Trade Exchanges (NATE) is a clearinghouse for member exchanges across the country, allowing business owners to swap just about anything with anyone. Participants typically receive “trade dollars” for their goods or services, which are brokered across cities nationwide with the help of NATE. Visit NATE at www.nate.org.
2. Time your payments. Ask suppliers if they give discounts for early payment. If not, it’s to your advantage to pay your bills-including utilities, taxes and suppliers-as late as possible without incurring a fee, advises Scott. “The longer funds are under your control,” he says, “the longer they’re earning a return for you rather than someone else.”
3. Join an association. Many trade and business associations have reasonable membership fees and offer discounts on everything from insurance, travel and car rental to long-distance phone service, prescriptions and even golf course fees.
4. Seek at least three bids on everything. Even mundane purchases merit shopping around. If you quote a competitor’s lower price, a supplier or vendor will often match that price to win your business.

Thanks to the contributors on this article: Jacquelyn Lynn, Ivan R. Misner, Chris Penttila, Guen Sublette and Laura Tiffan