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To Succeed In Business, You Must Evolve

tsibYour market has become saturated. Your clients’ needs have shifted. Your industry has been wiped out by technology. Is it time to pack it in? No — it’s just time to change. In fact, small-business experts point to change as the foremost ingredient of a flourishing company. Whether it’s a spin-off, a new product, an original twist on an old product, or a service completely separate from its parent, change in business should be ever-present, says Arnold Brown, chairman of New York City-based Weiner, Edrich, Brown Inc., a consulting group that specializes in the management of change and trend analysis. The key is the timing. “Everybody has to become a trendspotter,” Brown says. The French aristocrats knew it was time to change when they started getting their heads chopped off. By then it was too late.” Fortunately, small businesses are uniquely qualified to act fast and adapt quickly to change. In contrast to a conglomerate that needs layers of approval and stacks of paperwork just to switch to a different brand of coffee in the break room, a small company can switch directions on a dime.

To help you keep your head-and make sure your business heads in the right direction-we asked top experts for advice and talked with three entrepreneurs for whom change is a welcome caller in the workplace.

Tune in to Clients’ Needs

Travel agent Stanley Dalnekoff always prided himself on customer service: He installed custom printers in clients’ offices throughout the country to make issuing tickets more convenient. He added a courier to his staff to deliver tickets throughout Connecticut, where his company, New Haven Travel, is based. And he set up a 24-hour, toll-free reservation service.

So it was all the more frustrating when Dalnekoff kept coming up short when trying to offer customers the cheapest fare for airline seats, which were often the ones that became available the night before a flight.

“We would sell a ticket for the cheapest price available at the time of purchase,” he recalls. “But then clients who were wait-listed would call the airlines and if somebody in Oshkosh had canceled a seat at the last minute, a cheap seat would become available. It made us look foolish.”

Customer perception is crucial to maintaining business, points out Jack Burke, author of Creating Customer Connections (Merritt Publishing) and owner of Sound Marketing Inc. in Thousand Oaks, California. “In the marketplace there are only three niches where you can position your company,” Burke explains. “You either have to be the best in technology, the lowest in price, or the best in some value-added area, like customer service.” Dalnekoff’s customers’ perception that the agency was unable to secure the best price could have resulted in clients taking their business elsewhere.

What’s worse, customer dissatisfaction often takes entrepreneurs by surprise. “The average successful business owner has a tendency to get complacent”‘ Burke maintains. To stay on top, get in your car and visit your 10 largest accounts and find out how they view you. If the average business owner did this, he or she would be in for an awakening. The companies that remain successful over decades [have realized] that customers know what they want, and the company has to respond to that.”

Respond Dalnekoff did. The Scottish-born entrepreneur, an accountant by trade who was a systems analyst before his entree into the travel business, embarked on a mission to find a better way to meet his clients’ needs.

“I flew out to look at a new reservations system coming on the market. Then I figured out a way to automatically dial in to it. After two days, I knew it was going to work,” recalls Dalnekoff.

Dalnekoff formed Promised Land Technologies in 1990 and hired a programmer; nine months later, FlightClear software was born. The program automatically called airlines continually, checked flights for which Dalnekoff ‘s customers were wait-listed, and counted the number of times it tried. Typically, it found and booked a cheaper seat after 600 tries. By the following morning, about 50 percent of New Haven Travel’s wait-listed customers were booked for cheaper passage. The passengers embraced Dalnekoff; the airlines threatened him; and American Express offered to license his product for three years. Dalnekoff accepted.

Brainstorm on a Regular Basis

In time, the airlines changed their ticketing policy and American Express wrote its own reservation and booking software. Meanwhile Dalnekoff, who had already hired a second programmer for his sideline business, was making a tidy profit customizing and re-engineering software for other businesses. In the process, Promised Land Technologies discovered another void: user-friendly neural networks.

Neural networks enable users to predict outcomes based on data relationships. Trouble is, the process depends on mountains of information and demands an excellent historical database. During one of the business’s regularly scheduled meeting of the minds, Dalnekoff and his staff hypothesized that the task would be simpler if inputting data was easier.

Brown extols the benefits of such meetings where staffers pitch pie-in-the-sky ideas, then devise ways to implement them. “Have an internal skunk works,” he suggests. “Go out for a drink once a week or something like that. Come up with a variety of what-if scenarios. Have several people keep a diary. Every time you or they encounter a situation in which you’re frustrated because you don’t have something you need, write it down.” In that way you discover voids your company might be able to fill, and you also show your employees that you value their input.

As a result of their idea-generating session, Dalnekoff’s team designed a clone spreadsheet into which users could input data. The resulting program, Braincel, filled an immediate need. Now it works as an add-on to Microsoft Excel, and customers range from a doctor who uses it to help diagnose breast cancer tumors to Fortune 500 companies and entrepreneurs who use it for financial forecasting.

In addition to staff brainstorming, don’t forget about your own brain. “You’ve got to take part of your day — at least 10 percent — and reposition yourself for your future,” urges Brown. “Many heads of small companies say, ‘I can’t take 10 percent of my time to think about the future.’ But you must. You don’t have to be in the office. You can be driving or in the shower. Focus on what you can do in the future to make your business grow. And subscribe to at least one publication that infuriates you. It keeps your mind open.”

Take Time to Test New Waters

Mary Diffley had a tough time keeping an open mind about computing. She was an accountant working at a New York commodities firm in the late 1980s when she suddenly found herself heading up a project to automate records of the whole trading process. “I’d never even had a computer science course,” she recalls. Nevertheless, she was responsible for implementing networked computers throughout the offices and for convincing traders to input their data electronically.

“I had to struggle quite a bit to figure it out myself,” Diffley says of her plight. “I have to remember today how difficult it was to comprehend some of the concepts behind automation.” That struggle is what makes Diffley so understanding when it comes to dealing with businesses that are trying to get computerized. In 1992 Diffley turned her preparation into profits by founding New Directions, a company that introduced systems management to businesses in Rockland County, New York.

Then, while her technicians — a team of outside contractors — were busy putting computers in these companies and adding a host of productivity tools, Diffley immersed herself in her next project, learning about the Internet. “I started by looking at the capabilities of electronic communication, then set up my own bulletin board service. Shortly after that, the whole Internet took off and I fell in love with it,” she recalls. “I was investigating how this new medium could help my client base in Rockland County and I found there was very little info available. So I published a county directory. I earned nothing, but it was a lot of publicity and promotion, enough to get the ball rolling. Then I started to do training and showing companies what the internet could do for them.”

It was a natural progression, one lauded by experts. “If you’re bored with your business, or if you’re getting a little burned out, or if you’re in an area you like but you just need something different for yourself, the solution sometimes is to just bring new things into the business,” says Nancy Drescher, the Phoenix, Arizona, author of Which Business? Help in Selecting Your New Venture (The Oasis Press). “If it’s an area you really love, maybe you just need to change your focus.”

Inevitably, companies asked Diffley how they too could get on the Net. She referred them to the only provider in town — TZ-Link Internet. Soon Diffley and the provider found themselves in a constant state of referral. They decided to merge and in April 1996, United Computer Specialists was born. Now Diffley, partner Drew Morone, four staffers, and a host of outsourced consultants provide services in four distinct divisions: Internet access, Web site design, training, and hardware and software solutions.

Keep an Eye on the Crystal Ball

With the ever-changing nature of technology, Diffley envisions a future full of customers at her one-stop shop of technology solutions.

“It’s not so much about being ahead-it’s about being current with a focus of five years into the future — but I can see clearly to 18 months,” says Diffley. “Sure, I’ll get hit with surprises every day. You have to experiment with different products, but there is tremendous growth potential in this industry.”

Diffley’s approach is a sound one, says Bruce Tulgan, founder of the New Haven, Connecticut, management consulting group Rainmaker Inc. and author of Work This Way (Hyperion). “Can you predict what markets will be around in five years for your goods and services?” he asks. “Maybe you can’t, but you should project out as far as you can. Try to anticipate what’s going to change in your market and what the implications will be for your services, what new markets will open up, and what skills and services you already have that will be transferable.”

It might be a matter of repackaging your knowledge and skills. Tulgan reports that many entrepreneurs, like Diffley, are continually reinventing their product and service lines. “They’re looking at all the resources they have. Maybe they ask themselves, Do we have a database we can use in more ways than one? Are there skills our employees have that we’re not using to provide additional services?’ If you’re always looking for those synergies in a rapidly changing environment, you’ll be ahead of the game,” Tulgan says.

Find the Silver Lining

Often it takes some digging to discover the real value of your resources. Bud Levey spent thousands of hours in a Phoenix warehouse searching for pots of gold. But although recycling gold and silver stripped from the circuit boards of old mainframes was fruitful enough to pay the bills, it never filled up a treasure chest.

“In the old days when gold was $40 an ounce rather than $400 an ounce, a lot of it was used in mainframes,” reports Levey, a chemical engineer who worked a stint in the family radiator business before starting Electronic Materials Recovery Inc. in 1986. “But, as it turned out, I ended up getting in at the wrong time.”

By the time Levey entered the business many of the dinosaurs had already been buried. Still, there were companies that offered up their fossils, agreeing to part with them in return for a percentage of the riches. Often during Levey’s door-to-door prospecting, he came across heaps of equipment too obsolete to use but too good to throw away. He started buying these too and reselling them to equipment refurbishers out of state.

“You couldn’t cherry pick what you wanted,” Levey says. “You’d have to buy a large lot. They would put furniture in with these lots. Monitors, terminals, any kind of electronic widget and gadget you’ve ever seen in your life.” Not being one to pass up an opportunity, Levey got a bigger warehouse and started a new line of work.

“We put all the onesies and twosies into our warehouse and eventually had so much we opened it to the public. Highly technical people love playing with that kind of stuff. Before we knew it, the retail business took up half of our 6,000-square-foot warehouse,” Levey recalls. “Then we started getting PCs and they started selling very fast.”

Levey and partner Bill Woosley added personal computer repairs and sales of refurbished PCs to their metal-stripping, office-furniture-recycling business. This too burgeoned, and a full-scale retail business was close behind.

Today, Levey heads the 4,500-square-foot retail store Electronic Materials and Computers, which sells new computers at prices competitive with the big chains. Woosley runs the 4,500-square-foot warehouse, where customers still lose themselves for hours in search of the $25 oddball part that completes their home machines.

A key to the pair’s success is “preserving the assets,” says Tulgan. “Whether it’s the customer or the staff or whatever, don’t abandon what you have.” Another is directly observing the habits of customers, which Brown believes is a crucial component that many entrepreneurs overlook in favor of such methods as sophisticated focus groups and market research surveys.

Today, Levey’s $2 million, 13-employee company still recycles gold, but these days it’s sent out to strippers. And he still picks up old gadgets collecting dust at area corporations. “We keep our eyes open and listen to the needs out there,” says Levey, who recently started a monitor-repair business after the death of a contractor who repaired Electronic Materials Recovery Inc.’s shopworn monitors.

“It sort of happened the same way everything else happened. We needed to find someone to repair monitors and we called around and said, ‘Whom can you recommend?’ They said, Well, we deal with so-and-so. But could we recommend them? I don’t know.’ My partner and I said this is a major problem. Well, if there’s a problem, there’s got to be an opportunity,” says Levey. “We’ve been doing [monitor repair] for three months now. Business is outrageous.”

Good Financing Is Just Good Business

gfgbRichard Zoppo was already running a successful New Jersey pest control company when he discovered a tempting second route for sale. By jumping on die opportunity, he could double his business, expand to new territories, and garner more clients — all for an asking price of $35,000. Zoppo told that fine story to the bank where his business account had been growing for more than five years. He spent about $500 and weeks of preparation to have his accountant complete a loan request that included tax returns from both businesses, profit-and-loss histories, and a plan for integrating the two routes. He submitted the request, and waited. And waited, and… about two weeks later, the loan officer called to say, “I never saw such a nice proposal. Who’s your accountant? And, by the way, we’re not going to give you the money.”

Another bank request, another few weeks, and another resounding “No.” Zoppo was getting desperate, but lucky for him, so was the motivated seller. “Why don’t I just lend you the money?” the seller asked. With that, a successful deal was struck. The two exterminators drew up an agreement that gave Zoppo a five-year, 9 percent loan — and both walked away happy. “It’s better this way,” says Zoppo. “I’d rather pay him than a bank anyway.”

Not that he had a choice. The sad truth is that even though bankers crow about their emphasis on entrepreneurial lending and the Internet is plastered with small-business funding opportunities (some more legitimate than others), you’ll be hard pressed to find money when you need it in a hurry. In fact, fewer than one of every 400 companies looking for venture capital gets it. And even then, it’s a long, drawn-out process that can take up to a year for approval.

So what do you do if you’ve got a bright idea or a big deal that calls for immediate cash? Look closer to home, and be creative. Here are some sources when you need money in a hurry.

Whip out the plastic.

Credit cards aren’t pretty, but they work. When father and son Nick and Steve Uricchio were preparing to open their Bakersfield, California, restaurant, they spent three months applying for credit cards. They ended up with 34 cards, which they maxed out to the tune of $160,000. They leveraged that money to make down payments on equipment they leased or took loans on. A recipe for disaster? Hardly. Their restaurant grossed $1.2 million in its first year and these chefs to the stars have almost completely paid off their cards.

Credit cards make sense for smaller amounts of cash too. If you’re in a time crunch for buying a new computer, why not just put it on a card and pay it off when you get the cash? Business interest is deductible and you’ll save time by not trying to beg or borrow the money elsewhere. If you’re looking for lots of cash, the lower the interest rate on the credit card, the better.

Hit up the motivated seller.

Need a lot of equipment, a new business van, more storage space? Follow Zoppo’s lead and get the seller to carry you. You can arrange a private loan, lease your equipment, or buy what you need from a consumer outlet offering “No payments until May 1998!!” They’re out there. Suppliers will also go surprisingly far to float loans to people who buy their products, if they expect you to be a steady buyer. Let’s say you need 500 glass bottles every month so you can fill them with your new aromatherapy oils. Shop around for a glass maker who will send bottles on your purchase order, rather than your check. That way, you gain time to sell the oils before you pay for the inventory.

Call on loyal customers.

Many entrepreneurs are shy about getting their money up front, but don’t be — especially if you can offer a discount for early payment. Whether you sell tax services or taxidermy, all entrepreneurs incur expenses. To help you recover out-of-pocket client costs (such as outlays for printing), send a bill in advance of paying for the service. That is, unless lending money to clients is your business, in which case you already know where to find quick funding.

Tap your life insurance.

If you’ve accumulated cash value in an old-fashioned whole or universal life insurance policy, you can lend it to yourself cheap. And if your kids are grown and your spouse is self-sufficient, there’s a hidden bonus: You may never have to repay a policy you don’t need to collect on.

Seek out a speedier SBA.

Small Business Administration loans can be notoriously slow, but there are two programs that can land you fast cash. The first, called the SBA microloan program, offers loans of up to $25,000 through more than 100 nonprofit intermediaries to help low-income borrowers start businesses. The SBA says applications usually take a week or less to process. To find a lender near you, call 800-8ASK-SBA.

The SBA also guarantees “low documentation” loans of up to $100,000 through banks as well as nonbank lenders. If you qualify, you may be able to get your financing in under a week.

Try a home equity credit fine. Perhaps you want to keep your business and personal finances separate. But if you’re confident in your ability to repay a loan, you can’t do much better than a home equity line. Interest rates are low, because you’re putting your house up as collateral. If you already have a line, you just have to write a check to access your money.

Ask Dad (or Mom or your brother-in-law) to spare a dime.

The pros and cons of borrowing from family may be self-evident: It’s fast and it’s cheap, but beware those psychological strings that may be attached. If your relative can’t afford to lend money, don’t even ask. If someone can and is happy to fuel your business, draft a formal loan agreement and make payments on a timely basis.

Ferret out factors. When you have a business with a strong cash flow, you can sell your purchase orders or accounts receivable for 50 to 90 cents on the dollar to a finance company called a factor.

Shore up a line of credit before you need one.

Some banks are happy to provide a credit line when you’re not actually up against a slew of bills, and while you have the time to jump through those hoops. For instance, Wells Fargo Bank is aggressively pushing small-business lines of credit up to $25,000 that you can access by check or card.

Indeed, the best way to get money in a hurry is to plan far enough in advance that you’re not desperate. If you aren’t facing big expenses now, think about what you might need in three to five years. This way, you can use all of the above sources, including the more mainstream network of lenders that like to spend months mulling over your financial future.

Is Online Education Right For You?

ioerOk, class, here’s today’s pop quiz. Imagine you are interviewing yourself for the position of head of a business. Would you hire you? This is an essay question. You may begin.

I think I’d have aced the first part of the interview. I knew my trade when I quit my day job and went into business for myself as a writer and Web site developer. I had almost a decade of experience in the business, a Rolodex full of contacts, and a lot of regular work lined up. But the tough-cop questions that interviewers use to sort out the sheep from the goats would have consigned me to the goat pile in minutes. How much did I know about bookkeeping? Marketing? Growing a business? Human resources?

As a corporate hireling, I had always thrown these tasks into the “not my department” out-box. Especially the bit about human resources — as I proved by offering myself the positions of CEO, human resources director, president, janitor, and only employee of my fledgling company. An HR professional would have known better than to give that many duties to one person. I had two choices: I’d have to learn the skills of running a business myself, or I could hire people to do these jobs for me. My single inherited business skill — watching the cash flow like a hawk — decided the issue. Fifteen years after graduating with my liberal arts degree, I’d have to hit the books again to develop more business know-how.

But I was too busy running my start-up to schlepp to school. So I decided to leverage my investment in a computer and an Internet service provider by conducting my studies via e-mail and the Web.

As a starting point, I checked out Yahoo’s business courses links ( Courses/). Distance learning via modem seems to be catching on. At Yahoo, I located plenty of starting points, including major universities such as the University of Massachusetts at Dartmouth and at Lowell, as well as the University of California at Berkeley’s Extension program.

Bright College Daze I found that the Dartmouth and Lowell campus’s CyberEd courses translate the typical roster of assignments, tutorials, and lectures into Internet equivalents. For instance, class discussions take place via mailing lists, message forums, and online chat sessions. Both schools offered me a number of subjects that are typical business weak spots, including accounting, business information systems, finance, human resources management, and entire MBA programs. The prices were right too: Three-credit graduate-level courses were $483. Noncredit courses cost $135 each. But timing is everything when you’re signing up for a course, and I had missed the boat for this session by a few days. So I put my name down for e-mail notification during the sign-up period for the courses that I was interested in and moved on.

Berkeley Extension conducts courses in marketing, business administration, and international business via e-mail, fax, and interactive chat on America Online. Again, many of the courses are accredited, and a student can earn up to three units per semester (at a cost hovering between $300 and $400, depending on the duration of the course). The textbooks for the course can add about $100 to each. Once again, however, I managed to miss the registration period.

Learn From the Chamber If your business doesn’t afford you time to fit in with university semester schedules, what can you do? Turn to the U.S. Chamber of Commerce, for one thin The U.S. Chamber’s Small Business Institute has teamed up with the University of Wisconsin-Extension to provide a certified self-study program in small-business management. The flexible schedule was appealing, as were the series of seven $20 books that covered such handy topics as creating legal structures for a business, setting up financial goals, customer service, and marketing strategies.

The SBI also broadcasts pricier two-hour seminars via satellite TV, featuring such famous speakers as Dr. Ken Blanchard (the author of The One-Minute Manager). His lecture, Mission Possible: Becoming a World-Class Organization While There’s Still Time, had been running for a week before I found the site; apparently, time had run out for my world-class aspirations.

Recommended Reading

By now, I was wondering whether formal training online would ever fit my schedule. So I hopped over to a site called @Brint. This site is full of intelligent links to useful articles elsewhere on the Web — all smartly categorized. Best of all, the site is littered with caveat emptor warnings, letting you know that some of the articles are grounded in theories that aren’t necessarily respected. Why should you be cautious, for example, of Williamson’s Transaction Cost Economics? (I didn’t know either, but Old Brint quotes a couple of articles undermining the theory and practicality of the approach — the kind of context that most of the Web sorely lacks.)

But while it’s hard to fault the massive resources that @Brint collects, they are, academically speaking, recommended reading and not an education by themselves. They are wide-ranging and handy, but they are more like a visit to a library than a stint in the classroom.

The Virtual University The Altos Education Network is a different case altogether. An entirely Web-based teaching facility, Altos provides self-paced courses in subjects as diverse as raising capital, avoiding sexual harassment claims, the basics of finance, starting a business, and franchising. Moderately priced (between $50 and $300) compared to formal university courses, Altos’s offerings have one thing I hadn’t found anywhere else on the Web — a completely free course on entrepreneurship.

Entrepreneurship A-to-Z consists mainly of a lecture notes-style outline, but it also provides links to well-rounded articles on key topics and interactive questionnaires designed to see how your personality matches entrepreneurial styles. (Was I nervous about learning about myself through HTML? Sure… but I discovered, through taking the questionnaire, that I’m a risk-taker.)

To dig into the subject further, Altos’s Entrepreneur Support Group meets in a posting forum every Tuesday between 9 a.m. and 3 p.m. Pacific time. After registering at the site, I brought my questions, answers, and other issues to the forum. Like any public forum, I found it to be a mixed bag of interesting and irrelevant information — but that’s no different from any classroom (except for the online class’s higher proportion of interesting material, that is).

The best news of all, Entrepreneurship A-to-Z had no homework assignments. Naturally, the fee-based courses have a homework component, but I hadn’t committed to one of them yet.


One thing I’ve discovered by being in business for myself (and from Altos’s entrepreneurship course) is the importance of personal contact. So maybe, I argued, it would be better to find a training course or seminar that I could attend in person. As expected, there’s a Web site dedicated to finding just such courses — the Training and Seminar Locators, or TASL.

I picked keywords from my areas of ignorance and pumped them into TASL’s search form. Among the videotapes and stand-up lectures in hotel conference rooms were several references to computer-based training. These included a reference to Altos Education Network. Ever get the impression the Internet is trying to tell you something?

Don’t Complicate E-Commerce; Embrace It

dceeDespite all the sweet talk about Net commerce, when candy store owner Kevin Benz launched his Web site a year ago he knew getting sales wouldn’t be a cakewalk. So the 40-year-old entrepreneur signed up with CyberCash–an Internet company that accepts credit card transactions. Within one day of posting Sweet Thoughts’s home page, orders for his one-pound boxes of chocolates came pouring in. As a result, projected revenues for the Bellevue, Washington, Web-based company are $65,000.

Like Benz, many business owners realize that the best way to beef up online orders is to accept credit cards. And now companies such as CyberCash allow you to accept plastic and let you deal in digital dollars as well. Unfortunately, says David Buchen, director of the Web incubator project at the University of Wisconsin-Whitewater, “the public isn’t yet feeling that it’s secure enough. There’s been too much negative publicity about hackers breaking into what everybody thought were secure sites.” Fortunately, the public’s wariness hasn’t caused sales at Sweet Thoughts to hiccup. And because CyberCash’s encryption system is safe, Benz is planning to accept digital dollars.

But even with tight security, people are skeptical. Although they’re just like paper legal tender, digital dollars remain a distant second as the chosen currency of Net commerce. According to Jupiter Communications, a New York City research firm, only a fraction of the roughly 10,000 Web retailers now doing business online accept payment methods other than credit cards.

Still, if you sell items under $10 on your site, such as games, T-shirts, graphics, and CDs, you may want to look into digital dollars. That’s because it’s not cost-effective for you to handle such low-ticket purchases with plastic. In fact, Jupiter predicts that 16 percent of all online transactions will include digital dollars by the year 2000. To help you decide what kind of payment to deal in, we looked at three electronic commerce leaders.

Cash and Carry In Cyberspace

According to Jupiter, some half a million consumers use Cybercash’s services, making it the most popular electronic commerce provider. To join, customers establish an account with a Cybercash parmer bank, and load its free Wallet software onto their systems. Then, when they want to make a purchase, they get electronic cash from theft banks’ Web sites in increments of $20, up to $80 at a time. Or if customers wish, they can charge CyberCash to their credit cards. Then, once a customer has made a purchase and up-loaded the cash to his account, he can hack purchases and reconcile account balances onscreen. To keep the Reston, Virginia, company at the financial forefront, Cybercash recently introduced CyberCoin, which consumers can use to make small purchases from 25 cents to $10.

For business owners, the company’s CashRegister software is also free. So where does CyberCash make its money? Merchants are charged a per-transaction fee of 1 to 5 percent for CyberCash users. For purchases made with Cybercoins, you’re charged 8 cents for each 25-cent transaction, sliding up to 31 cents for each $10 transaction. The company claims its system is compatible with 90 percent of merchant banks as well as most order-processing systems.

Another company offering electronic commerce is San Diego’s First Virtual. Its VirtualPIN, basically an alphanumeric alias for a user’s e-mail address and credit card number, boasts more than 200,000 registered customers and some 3,000 merchants. Established businesses pay an application fee of $350, an annual fee of $350, and per-transaction fees of 2 percent, plus 29′ cents. New or small businesses can register at for $10, but there’s a 91-day period for the release of the entire amount of each transaction. This is meant to give First Virtual adequate protection against fly-by-night merchants.

To ensure secure transactions, customers register for free First Virtual membership online but submit sensitive information only over the phone. This way, when a customer is ready to buy one of your products, she simply e-mails you the order along with her PIN. You then forward the information to First Virtual, which confirms the purchase with your client via e-mail.

Since offering VirtualPIN on his Barrington Coffee Roasting Co. site just a few months ago, Gregg Charbonneau’s orders have been percolating: VirtualPIN purchases amount to 25 percent of the Great Barrington, Massachusetts, company’s sales.

Another form of cyberspace commerce is ecash, an electronic checking account into which your customers can deposit money. Backed by Mark Twain Banks for DigiCash B.V., only about 200 merchants had signed on by the beginning of 1997. One reason for its unpopularity among online entrepreneurs is its pricing structure: An ecash account costs $100 for a onetime setup fee and, beginning next year, $5 a month for the processing fee. Then, when you want to transfer money from your ecash account to your real business bank account, Twain Banks tacks on another 2 percent.

For customers, the ecash transaction process is just as cumbersome. For a onetime fee of $11, consumers establish an account at Twain Banks, then request transfers from it to the bank’s ecash Mint. The Mint coins and modems the money to the customer’s PC. When a customer wants to make an online purchase, he confirms the amount, purpose, and payee via PC, and the ecash software transfers the amount to the merchant’s account. An onscreen log lets customers monitor their balances and perform other functions.

According to Jupiter, this digital-cash system has been “riddled with problems” for business owners. And as an ecash consumer, James Ware, executive director of the Fisher Center for Information Technology & Management at the University of California at Berkeley, isn’t impressed. “You spend money in advance–just so you can have it stored in your computer, without any expectation of immediate use. And you give up any interest on the money.”

Working Out the Kinks

For electronic commerce to take off, ease of use for both consumers and business owners must be a priority. With any of these systems, “customers have to upload one of their free ‘wallets,’so it’s already complicated,” complains Gary Kohlenberg, owner of a Brookfield, Wisconsin, company that sells classified ads online. Likewise, retailers find linking some of these digital dollar services m existing order-processing systems difficult. Then there are security concerns. Recent surveys reveal that the public persists in its wariness of disclosing private information via the Web–even though companies tout the impenetrability of their systems.

Despite the drawbacks, electronic commerce options continue to grow. CyberCash recently introduced an electronic check service. Visa, MasterCard, and other companies are finalizing the Secure Electronic Transactions (SET) standard that will serve as the global, encrypted-payment infrastructure for the Web. And then there are smart cards– credit cards embedded with chips that function as electronic purses. Experts expect the introduction of smart card-ready PCs by December. Last, there’s PC banking–in which you could conceivably handle electronic transactions directly with your bank online.

“We’ll eventually have an Internet payment world that resembles the offline retail market,” predicts Scott Smith, director of Jupiter’s digital commerce group. “Consumers will use a variety of options.”

Charity Begins On The Web!

cbotwThe end of another year brings the rush to reduce your tax bill. Although December 31 looms, you’re probably too busy to weed through the tax-deductible organization pleas cluttering your mailbox. But focus your energy online and you’ll see that finding a worthy charity isn’t as hard as you might think. Follow my crash course on online charitable giving and in an evening you’ll find a group for your donation.

The first site I hit is Money magazine online’s Charity Selector. These pages list such big-name nonprofits as the American Red Cross and March of Dimes as well as lesser-known groups. I could easily and confidently choose any one of these organizations and give a lump sum.

In a little over an hour, using the Charity Selector’s Web links, I manage to download mission statements, program rosters, membership details, and donation forms for a dozen of the top 100 charities. Some of the leading organizations include the National Trust for Historic Preservation (, Habitat for Humanity International (, the Metropolitan Opera (, and the American Heart Association (

Afraid that you can’t find the right outlet for your interest in the plight of Native Americans or beach erosion? Push on.

Worthy Tiny Tims

In search of smaller charitable organizations that have information online, I locate nonprofits related to hiking and the environment. Searching under the environmental category at the nonprofit Independent Charities of America’s Charities-USA (, I find the American Hiking Society, the Appalachian Trail Conference, and the Greater Yellowstone Coalition.

If hiking doesn’t interest you, why not check out some organizations that help legal and international causes. Action Without Borders (www. claims a directory of some 10,000 U.S. and international nonprofit Web sites. A real find, it helps me locate a wide range of local charities. A visit to the American Council for Voluntary International Action ( locates worldwide nonprofits providing humanitarian assistance. A quick search at the straightforward America’s Charities¬† yields the Native American Rights Fund (, which helps tribes and villages.

Perhaps your legal interests are geared toward freedom of the press and privacy issues. If so, you’ll find Fairness & Accuracy in Reporting, or FAIR (, and the Privacy Rights Clearinghouse ( at Nonprofit Organizations on the Internet ( Non/non-pic.html), which provides links to more than 50 groups and overviews.

These sites don’t begin to tap all the charity information available online. The nonprofit locator section of the comprehensive Internet Nonprofit Center ( offers searches of some I million tax-exempt entities.

How specific can you get with an online charity hunt? I search Benefice on my particular interests and turn up the Women’s History Project¬† as well as contact information for nonprofits that lack a Web home, including Adopt a Beach and the Tree Trust. A last cruise on the Net brings me to Cats Haven, an irresistible cat shelter. One look at the beauties on these pages and this allergy-ridden cat-lover-from-afar finds herself signing up for the sponsorship program.

Digging beyond the big-name charities yields some wonderful specialty nonprofits that will satisfy your creative urges.

The Dollars and Sense of Giving

I’m clicking away when I notice advisories on charitable giving sprinkled among the site links. One FTC fact sheet notes that “close to $1.43 billion in 1995 contributions were misused or misappropriated,” and a top consumer financial publication advises that even well-known charities have been plagued by scandal in recent years.

Scouting for charities is fun, but this expedition has financial ramifications. If you plan to deduct your charitable contributions on your tax return, the nonprofit must be recognized as a tax-exempt organization by the IRS and have 501(c)(3) status. You can verify this information in an organization’s annual report or through evaluations supplied by independent groups.

Although a number of independent organizations such as the National Charities Information Bureau (www. and the Better Business Bureau ( offer reports online, you’ll find that these summaries vary widely in completeness, content, evaluation methods, and timeliness.

To get up to speed in a flash on the fine points of nonprofit giving, make a quick stop at GuideStar’s FAQs about nonprofits (, the Council of Better Business Bureaus, and the United Way ( (Also see “Give Wisely.”)

How to Ante Up Online

In several cases, particularly for larger groups, payment is a one-step process. Many charities accept credit cards through online forms protected by the industry standard Secure Sockets Layer (SSL) encryption supported in both Netscape Navigator 2.X and Microsoft’s Internet Explorer 3.X. If I were uncomfortable giving online or if the organization didn’t accept digital donations, I could call in my pledge. In many cases, I can also fax or mail in a provided form. Some groups will even bill me.

As long as you contribute $250 or less to each charity, the IRS will accept a canceled check or a credit card statement as proof of your contribution. However, the IRS requires that a charity give you a receipt for any donation amount greater than $250 for you to take a deduction. Some organizations do this via e-mail; others will mail it to you.

If I were in a hurry (or lazy), I could even consolidate gifts to multiple charities at Give On-line. This free, SSL-encrypted service forwards a completed pledge form to the charities I designate. I can have a charity call me for billing details or send me an invoice. The pledge card at America’s Charities USA site provides a similar service.

So spend a couple of hours surfing one Sunday. You’re bound to find an organization that could use your money wisely-and you’ll see your tax bill decrease. Besides, donating to charity makes a personal connection that links you with a worldwide community. Why not pick a few and enjoy how it feels?

Giving Wisely

To make sure you aren’t throwing money away, you’ve got to know how a nonprofit is using your donation. First, look for the group’s annual report or financial statement. Since most nonprofits do not include financial statements or a breakdown of income and expenses on their Web sites, you may have to e-mail them a request for a financial statement or annual report. You might also wish to request copies of their three most recent Form 990 federal tax returns.

When you get the financial report, check out how much the organization spends on administrative expenses (such as fund-raising and staff). These amounts should be relatively low; program expenses should be high. Nonprofit consultants and watchdog organizations suggest that a charitable organization spend a minimum of 60 percent of donor contributions on program expenses. The American Red Cross, for example, spends almost 92 percent of its income on programs (versus an average of 78.4 percent for Money’s ranking of the 100 biggest nonprofits).