Small business resources available

Small business resources available

Written by Kara Vaught Friday, 07 December 2007

Peter Coomaraswamy began his business in 1996 in his Austin living room with $2,000 of his own money, a knowledge of the publishing industry and good relationships with people in it through his former job.

As more big box retailers and branches of national companies move into the area, some residents have questioned if small businesses can compete.

In Coomaraswamy’s case, the answer was yes. Despite pressure from Amazon.com and BarnesandNoble.com, today he is the CEO of multi-million dollar Complete Book & Media Supply, Inc. in Cedar Park, the world’s largest non-publisher supplier of books, publications, videos and audio recordings to businesses. It is also one of the largest suppliers of such material to the government.

It was the competition from the two book giants that jump-started Complete Books management to focus on growing the company, said vice president Robert Tijerina.

“They were kind of a blessing in disguise,” he said. “[Before them,] we all got our paycheck on Friday, everybody was comfortable and life was good. Maybe we should have been forward thinking enough to say, ‘What kind of added values and services can we give our customers?’ without someone else forcing us to do it.”

How to fight Goliaths

In 2004, some of Complete Book’s clients contacted the company saying Amazon.com and BarnesandNoble.com were making tempting offers such as free shipping.

“Though our clients had been loyal to us, as we had been to them, they were getting a better offer of more value-added services,” Tijerina said.

The only way Complete Book could compete was to gain more clients and produce more revenue in order to provide customers better offers.

“It was a real tricky play on our part to try to pull off,” Tijerina said.

But it worked.

The company had a three-year run of more than 40 percent growth per year. In 2008, it will make the leap into offering electronic versions of printed materials.

The key to success, Tijerina said, is “Good folks and a lot of sweat and a lot of hard work.”

For companies with those attributes and the right business model, help may also be available from the city.

Help if you ship

Although large incentives get the most attention from media, cities can also incentivize some small businesses, said Phil Brewer, economic development director for Cedar Park.

Complete Book received an incentive when it relocated from Austin.

“We gave them $26,600 for an alarm system, moving costs and the finish out of their building on Discovery Boulevard,” Brewer said.

The money was awarded through the city’s 4A Corporation, which supports economic development and is funded by Cedar Park’s one-cent sales tax.

Regulations governing 4A Corporations permit the granting of funds to businesses that ship products outside of the city limits, but restrict 4A money from those that do not.

That is the reason why small, locally owned retail shops rarely receive incentives, Brewer said, including property tax abatements, which are granted by the city and not a 4A.

“Most of your small mom-and-pop-type family businesses are going to go into existing space, usually in some type of shopping center,” he said. “Those buildings are already on the tax rolls, and by state law you cannot abate taxes on something that’s already on the rolls.”

If a small business owner wanted to build a new facility, the city would be allowed to offer a property tax abatement incentive.

“If Mr. and Mrs. Smith were going to build a restaurant in the community and invest $2 million in land and building and equipment, I think that we would be open to sitting down and visiting with them in terms of how we could maybe help them with property taxes,” Brewer said.

Leander does not have a 4A Corporation, but does provide incentives such as reimbursing the cost of infrastructure such as sewer lines, said economic development director Kirk Clennan.

“The next logical step for us [to encourage small business growth] would be to focus on a small business loan program with one of our local financial institutions,” he said.

Advertising and education

Education and other resources to small businesses are available locally through the chambers of commerce.

Both the Leander and Cedar Park chambers offer low-cost advertising opportunities on city maps, membership directories, on chamber Web sites, at golf tournaments and special chamber events.

Business owners can also go to the chambers for help in connecting with educational resources for themselves and their employees, such as the Texas Small Business Association’s local branch in Round Rock, Austin Community College and the Leander Independent School District.

“All the things we do are to assist members in building their credibility with each other through networking opportunities of all kinds,” said Harold Dean, president of the Cedar Park Chamber of Commerce.

Coming in 2008, the chamber will host round-table seminars on topics requested by members, including computer skills, insurance and taxes.

In Leander, the chamber sponsors seasonal city bus tours, the most recent of which took 224 people on a 44-mile trip around developments and available properties. The Leander Business Circle, a group sponsored by the chamber, often invites expert speakers to lecture on topics relevant to small business owners.

Challenges remain

Even with assistance and dedication, small businesses face obstacles.

A major stumbling block could be a result of otherwise valuable traits: a strong work ethic and attention to detail.

Tijerina cites an example of a man who was very talented in his craft, but failed because he tried to micro-manage other aspects of business and spent little time in his area of expertise.

Taxes, regulations and fees also weigh heavily on entrepreneurs. According to the U.S. Small Business Administration’s Office of Advocacy, firms with fewer employees pay more per employee to comply with state and federal regulations.

“The cost of compliance is somewhat fixed, and a larger company can simply spread out that cost more,” said John McDowell, press secretary for the SBA Office of Advocacy. “For example, there’s not a whole lot of difference in doing taxes for a 20 person firm and doing them for a 200 or 400 person firm.”

Still strong

The Central Texas area is a prime example of how small businesses can succeed, Clennan said.

“If anything, the competitiveness and the incubator that a large business can afford someone who is entrepreneurial grows our economy. Dell has spawned many, many small companies.”

When Wal-Mart came to Cedar Park, Dean said people wondered how it would affect smaller shops. But then and now, after big box stores opened in 1890 Ranch, he’s heard little from shop owners.

“It wasn’t much of a concern from owners — or if it was, they did not voice their opinion.”

Sources of business assistance

Austin Community College - (for continuing education for employers and employees)

Cypress Creek Campus, 223-2010, 1555 Cypress Creek Road, Cedar Park, www.austincc.edu/cyp

Leander Center, Leander High School, 435-8006, 3301 S. Bagdad Road, Leander, www.austincc.edu/centerleander.php

Cedar Park Chamber of Commerce, 260-7800, 1490 E. Whitestone Blvd., Bldg. 2, Ste. 180, Cedar Park, www.cedarparkchamber.org

Internal Revenue Service, small business tax resources, www.irs.gov/businesses/small/

Leander Chamber of Commerce, 259-1907, 103 N. Brushy St., Leander, www.leandercc.org

Texas State Small Business Development Center, 716-4800, 1555 University Blvd., Ste. 265, Round Rock, TX 78664, www.business.txstate.edu/sbdc

U.S. Small Business Administration, 1-800-U-ASK-SBA (1-800-827-5722), www.sba.gov

Office of Advocacy, (202) 205-6533, www.sba.gov/advo/

Taxes

The following taxes apply to many small businesses. Other taxes and fees may apply to certain companies based on product or industry.

• Payroll taxes – Payroll tax, 7.65 percent of each employee’s paycheck, is a combination of Social Security, 6.2 percent, and Medicare, 1.45 percent. The employer withholds 7.65 percent of each employee’s paycheck and must match that amount with his or her own funds.
• Self-employment – Because the owner of a company does not receive a paycheck from an employer, he or she must pay both the employee and employer portion of both Social Security and Medicare: 15.3 percent of total net income.
• State unemployment tax – New businesses pay 2.7 percent of each employee’s paycheck on the first $9,000 in total payroll. After the first 18 months in business, the employer’s rate drops to 0.29 percent of each employee’s paycheck.
• Federal income tax – Sole proprietors, partnerships, limited liability companies and corporations may pay up to 35 percent of net income.
• Federal unemployment tax – Calculated as 0.8 percent of each employee’s paycheck on the first $7,000 in total payroll.
• Sales tax – In Texas, it is 8.25 percent of the cost of retail goods sold. This amount is collected from the purchaser as part of the total item cost and then remitted to the state by the business owner.
• Franchise taxes (renamed margin tax in January 2007) – Paid by any organization with a charter, including corporations, limited liability companies, some partnerships, professional associations, joint ventures, business trusts and some other legal entities. The calculation is based on gross receipts. See www.window.state.tx.us for more information.
• Beer and liquor – 14 percent of alcohol sales.

Source: Brandon Moore, CPA with Singleton Moore and Co. in Cedar Park