By Emily Maltby The holiday season is typically a time for rest and reflection. But it is also a boon for small-business owners who seize the opportunity to reposition their companies.Year-end strategizing is even more essential now because of the economic slowdown, experts say. And by comparing 2009 with prior years, business owners are likely to sense coming customer trends, says Peter Iannone, managing director of CBIZ MHM LLC, which provides accounting, tax and advisory services.
Amber O’Neal, owner of Café Physique LLC in Atlanta, is revising her business model after a particularly difficult 2009. When the company started in 2006, Café Physique’s nutritionists and fitness instructors provided training services directly at clients’ homes. As the business grew, Ms. O’Neal opened a small fitness studio to complement the in-home training. She upgraded to a larger facility in early 2009, in tandem with the demand.Then, almost as soon as she signed the lease to the new studio, the recession hit Ms. O’Neal’s business. “Everything slowed down,” she recalls. While the mobile aspect of her business fared better thanks to the minimal overhead expenses, “the studio, on the other hand, was losing thousands [of dollars] every month,” she says.As part of her end-of-year reflection, Ms. O’Neal has had to carefully consider the options. She can float the studio using a line of credit, but she doesn’t feel comfortable with what she calls the “sit-back-and-wait approach.” So instead, Ms. O’Neal has decided to close the studio and go back to the original model of 100%, in-home training.”It’s hard to let go—that place is my baby,” she says of the studio, which is set to shutter in late January. “But I have to listen to the clients.”Mr. Iannone, at the Los Angeles office of CBIZ MHM, says it is crucial for business owners to predict not just the most successful product lines, but also the best marketing methods to deliver those lines. “The first quarter [of 2010] should have moderate improvement, so now it is important to listen to customers and position for what they want to buy,” Mr. Iannone says. “If you can anticipate that, you can ride the uptick and get more market share in the process.” Right now, Ms. O’Neal is launching a new marketing plan for January—typically the busiest time for Café Physique, thanks to New Year’s fitness resolutions—starting with a direct-mail campaign and a new incentive referral program. Ms. O’Neal also is in discussions with a consultant to take the mobile model national—a move that would be too challenging with brick-and-mortar locations.
Matthew Vuturo also is hoping to expand his company by revamping its marketing. His plan is to establish a more-solid Web presence through YouTube video vignettes about the company, GPI Prototype and Manufacturing Services Inc. The videos, each two- to three-minute skits written by GPI’s staff, will demonstrate the company’s rapid prototyping technologies and their potential applications.As director of sales and marketing, Mr. Vuturo knows the importance of promoting a business online, but the employees at the Lake Bluff, Ill., company are unable to memorize, rehearse and act out the scripts when they are busy taking care of clients. “There are so many things we’d like to do and even if we turned off the phones for a month, it seems we can’t get it all done,” Mr. Vuturo says, adding that the current downtime has put the firm on track to finish the project in early 2010. “I hope [the videos] will inspire interest and intrigue for an audience we haven’t reached yet.” he says.At DiggersList.com, Matt Knox also is harnessing the holiday-season downtime to evaluate business partnerships. “We now have 12 months of data,” says the chief executive of the Manhattan Beach, Calif., start-up, which runs construction classified advertising. “The fact that the phones are quieter allows us to look back at the strategic relationships,” he adds. “It’s a wonderful opportunity to see which ones are win-win and which ones were one-sided, either for them or us.”DiggersList recently began working with Habitat for Humanity, a nonprofit group that sells used and donated tools to raise funds for the organization. DiggersList already has posted on its Web site the inventory from 25 of the approximately 500 Habitat resale stores. “We’ll look to see, have they been selling a lot?” says Mr. Knox. “Should we flesh out their other locations? And can we expand in that space and work with other organizations like that?”Once those questions are answered, Mr. Knox expects to set milestones for the next 12 months and outline a plan to reach those goals. Write to Emily Maltby at emily.maltby@wsj.com

By Dawn Wotapka and Gary Fields WASHINGTON — A last-minute addition to the Senate health-care bill that requires small construction companies to offer health coverage or pay a fine touched off a battle Tuesday with some industry groups demanding its removal.The change, offered by Sen. Jeff Merkley (D., Ore.), says construction companies should offer coverage if they have five or more employees and a payroll of $250,000 or more, or face fines of up to $750 per employee per year if the employees receive tax credits. The threshold for other types of companies is 50.Construction-related industries say it is unfair to single them out, as the recession has hit them particularly hard. Recent data show that unemployment in construction is 19.4%, nearly twice the national average of 10%.
Jerry Howard, chief executive of the National Association of Home Builders, said he had heard conversations about the proposal but was assured it wouldn’t make it into the bill.”I think that a great many Democratic senators were taken as much by surprise at the inclusion of this provision as we were,” he said.The Senate has closed the door on amendments to the bill, so if it passes, the last chance to change the construction-industry provision would be in House-Senate conference negotiations.
Geoffrey Burr, vice president of federal affairs with the Associated Builders and Contractors, said about 95% of his group’s 25,000 members offer coverage, according to surveys by the group. The remaining 5% say they can’t in part because “their margins are so thin they can’t afford to do so,” he said.Julie Edwards, a spokeswoman for Mr. Merkley, said the topic had been under discussion since at least mid-November and the initial version of the amendment was filed Dec. 11.Ms. Edwards said the goal was to level the playing field for companies that have to bid against others who might not be providing health-care coverage. She said 90% of construction firms employ fewer than 20 employees, so with the 50-employee threshold, most of the construction industry would have been exempt, she said.The provision has been endorsed by associations that represent 64% of the contractors in the industry, Ms. Edwards said.
Lake Coulson, executive director of government affairs for the National Electrical Contractors Association, which has 4,500 members, said his organization supported the change. “We felt the exemption was too wide,” he said. “It’s an unfair competitive advantage for the companies that don’t provide it that we compete against.”
Jerry Gorski, president of Gorski Engineering Inc., in Collegeville, Pa., said he provides coverage for his 20 employees and their families, but doesn’t think competitors should be required to do the same.”We’re competitive not because of what we decide to do on health insurance but because of how we run our company,” he said. “In the United States of America I should be able to decide how and what I do to attract the employees I want.”
Mark Sincavage, whose Blakeslee, Pa., commercial excavation company is a construction-related industry, said he has laid off four of his six employees and continues paying health insurance for the two who remain. He said that while the measure didn’t affect him, he agreed the larger issue is the push for more regulation. “We keep hearing small business is the backbone of the American free-enterprise system and they continue to come up with plans that penalize us,” he said.”I think it does level the playing field but it has been my experience in my area that everyone offers health care to employees because they have incentive to get quality employees,” Mr. Sincavage said. “It’s not a benefit to me. It’s just another intrusion.”
Write to Dawn Wotapka at dawn.wotapka@dowjones.com and Gary Fields at gary.fields@wsj.com

By Willa Plank What happens when your sweaters or electronics aren’t sold before the Christmas holiday? Instead of drastically marking down merchandise for post-holiday sales, there are a few ways to unload excess inventory without severely hurting your bottom line. Here’s how.
1. Sell your inventory through a consignment outfit. Roberta Weissburg, owner of Roberta Weissburg Leathers in Pittsburgh, says she consigns her excess items year-round to the local National Council of Jewish Women chapter, which has a consignment operation. Weissburg gets a percentage of the profit, although if merchandise is not sold within a certain time, she gets it back. Ms. Weissburg says the option helps moves merchandise – at least out of her store. “Our customers are loyal and they know our merchandise as well as I do,” Ms. Weissburg says. “If they see the same pieces year after year, they might wonder if there is something wrong with our business.” One site to find consignment shops is ConsignmentShops.com.Bonnie Rubin, interim executive director of the National Council of Jewish Women’s Pittsburgh chapter, says some retailers also donate to the thrift operation if merchandise doesn’t sell at consignment, which counts as a tax write-off for those retailers. To locate thrift shops for donating merchandise, consult a directory such as TheThriftShopper.com.
2. Sell to a liquidator.
Hudson Salvage LLC, based in Hattiesburg, Miss., pays cash upfront for excess inventory, which is later sold in its Dirt Cheap and Treasure Hunt stores. Robert Roberts, chief executive, says the company typically buys large amounts of inventory from a small client – usually, about $10,000 or more – but will consider smaller amounts. The benefits of using a liquidator can include: receiving cash upfront, having someone else take care of logistics such as shipping, and closing the transaction quickly. Most companies that work with Hudson Salvage are “looking for liquidity in a very short period of time,” Roberts said. A downside to using a liquidator is receiving less than the original wholesale price for the products. Hudson Salvage, for instance, generally pays around 50% or more of the wholesale price for consumable goods or well-known branded inventories, but will pay 10-30% for private-label or slow-moving inventory. Other liquidators include Excesstechnologies.com and Liquidation.com. The latter manages the auction of inventory, from single to multiple items.
3. Don’t forget online marketplaces. Small merchants who don’t have enough to sell to a liquidator can always try unloading merchandise through third-party sites, says Charles “Tee” Rowe, president and chief executive of Association of Small Business Development Centers. Retailers who are trying to sell single items may have luck listing products on eBay and Craigslist. Another marketplace for slightly larger quantities is Overstock.com. Businesses can sell their inventory outright to the site, or partner with the site to list their fixed-price products. Write to Willa Plank at willa.plank@dowjones.com

By Damian Paletta WASHINGTON—Community bankers got their first exclusive meeting Tuesday with President Barack Obama amid an intensifying fight within the industry over legislation that would tighten federal financial regulation.Mr. Obama used the White House parley with executives from smaller banks to reiterate his push for bankers to do more lending to small businesses. “The pendulum may have swung too far in the direction of not lending,” Mr. Obama said, adding that the White House is working on ways to cut “red tape” that banks complain is making it harder to lend. He suggested the White House wouldn’t intervene with federal regulators though, which many bankers complain are being too strict. “We don’t have direct influence over our independent regulators,” Mr. Obama said. A top focus for the White House in the coming months will be to push for more lending, he said, and that can only be done with the cooperation of financial institutions.But getting bankers to sing from the same hymnal won’t be easy. Two bankers’ groups, the American Bankers Association and the Independent Community Bankers of America, are challenging each other, and delivering competing messages on Capitol Hill as Congress weighs a wide-ranging overhaul of financial industry regulation. The ABA and ICBA both claim to speak for “community banks,” but they took starkly different positions on a recent House bill. The ICBA supported it, while the ABA opposed it. The spat among bankers promises to become nastier as the Senate takes up the bill. “The name-calling is really partly a strategy to build their brands against each other, and I think it’s foolish,” said Ed Mierzwinski, consumer program director at U.S. PIRG, a coalition of consumer groups that frequently fights against the banking industry. “To the extent that it hurts them, it’s great that they are fighting with each other and using up their bandwidth.”ABA officials say ICBA officials have been too willing to throw their support behind controversial legislation in exchange for modest changes in the bill. ICBA officials counter that the ABA is conflicted because it represents both small community banks and large Wall Street firms that are often at odds with each other. Conflicting messages from the industry “will invite the enactment of a bill that will truly hurt us badly for years to come,” ABA Chairman Art Johnson wrote in a letter to chief executives earlier this month. ICBA officials bristled at the letter, and Chief Executive Cam Fine said he felt it attacked his group’s “leadership personally.” He had his own criticism of his group’s rival. “ABA represents both the very largest financial firms and some smaller institutions whose best interests are not always the same,” he said.The ICBA backed a provision in the House bill that would allow the government to go in and break up big banks if regulators believe the company could pose a risk to the broader economy. The ABA opposed this measure. ICBA has also argued for stricter limits on the amount of deposits banks should be able to control, an idea the ABA has fought. Community banks are traditionally held in higher esteem in Washington than are large banks, in part because community bankers are in each lawmaker’s district and the group collectively wields considerable influence. After the House passed its bill earlier this month that would raise fees and impose new limits against large financial companies, House Financial Services Committee Chairman Barney Frank (D., Mass.) said large banks didn’t wield as much influence.”It’s not the big banks that have the clout,” he said. “It’s the community banks and the credit unions.”The financial crisis has exposed cracks in part of the financial system, with several large companies getting bailed out by the federal government. In addition, 165 banks have failed since January 2008. There are more than 8,000 banks in the country, and most are small, with less than $10 billion in assets.The ABA, created in 1875, says its members represent 95% of the total assets within the banking system, though it won’t disclose exactly how many banks pay dues.The ICBA, created in 1930, says it speaks for more than 5,000 dues-paying banks. Combined, the groups spent close to $10 million lobbying Congress in the first nine months of the year, according to the Center for Responsive Politics. Write to Damian Paletta at damian.paletta@wsj.com

By Kevin Helliker Last spring, John Brussock quit a corporate job to launch a start-up called DeliverMyChristmasTree.Com to sell the seasonal softwoods over the Internet.But the concept wasn’t exactly original; plenty of tree purveyors already offered online sales. Nor was it particularly promising: Point-of-purchase surveys of Christmas tree buyers in 2007 and 2008 had found negligible evidence of Internet sales. Cataloguer L.L. Bean had recently dropped Christmas trees from its mail-order business for lack of demand. The most popular point of Christmas-tree purchase — farms that let customers choose and cut their own — seemed to reflect a desire to see and touch the product before purchasing. Besides, any tree taller than seven feet ships at a prohibitive price.Yet Mr. Brussock, 23 years old, was determined to make his online start-up work, mostly because his heart belonged to Christmas trees. Ever since he was a boy, he had helped his father plant, prune and fell Christmas trees on their farm in southern Wisconsin. Back then, during the holiday season, they would drive together to suburban Chicago to sell their harvest from a retail lot.”I probably shouldn’t say this, but John was still in diapers the first time he put in a 10-hour day helping his father on the farm,” says Kitty Brussock, John’s mother.He missed last season with the trees because, after receiving an economics degree from the University of Wisconsin, he had taken a job selling commercial real estate in Chicago. “He was a great employee and I’d love to have him back,” says Craig Braham, chief executive of Advocate Commercial Real Estate Advisors.Big-city, suit-and-tie work only intensified Mr. Brussock’s yearning for hills lined with Fraser and Balsam firs. He missed the satisfying weariness he felt after a long day of hauling trees. His father missed him, too. “I don’t know that there’s anything better in life than working with your son,” says James Brussock, a white-bearded 64-year-old who is a civil engineer by training.John approached his father about coming back. But, he says, “I wanted to do my own thing, not just finish what my dad had started.” He told his father he wanted to start DeliverMyChristmasTree.com.His father’s business, Sandhill Christmas Trees, had a Web site, but only for providing information about wholesale tree purchases and the retail lot Sandhill operates in the Chicago suburb of Oak Park, Ill. The younger Brussock wanted to create a site that would let customers choose a size and shipping date and pay online.James Brussock says he understood John’s desire to put his own stamp on the business. He fronted his son some start-up money while consciously tempering his enthusiasm for John’s return. “If I act overly happy, I’ll scare him away,” Mr. Brussock recalls thinking. John stayed in Chicago, near the retail lot, but travels frequently to work at the farm.Perhaps the biggest obstacle the venture faced was tree buyers’ intangible desire to tangibly sample their tree before buying.”I wouldn’t ever buy a tree without seeing it first,” says Jamee Hobbs, a suburban Kansas City housewife, recalling a family outing last month to a Christmas-tree farm where a lushly rounded nine-footer atop a frosty hill caught the eyes of her little boys. After her husband felled it and placed it on a dolly, the boys helped pull it toward a pay barn where hot cocoa steamed beside a wood-burning stove. “They’re still talking about that day,” says Mrs. Hobbs, 29, of her five- and two-year-old.But John Brussock had done homework suggesting that, in a $1.2 billion industry, many customers would welcome a tree delivered hassle-free to their door, especially if they understood that it was more freshly cut than many sale-lot trees. And if they understood that for firs under seven feet tall the cost of shipping is often offset by the savings reaped from cutting out the retailer between tree farms and customers.Certainly, the National Christmas Tree Association, which represents growers and retailers, is trying to promote online sales. “It’s how we purchase our tree every year,” spokesman Rick Dungey says of how the association gets its office tree.To illustrate another online advantage, the association in recent days posted a video on YouTube showing how a shipped tree can be placed in its stand while still in the box, avoiding some of the loose-needle litter that inevitably follows a tree dragged into the living room.Of the roughly 5,000 members of the association, barely 50 have identified themselves on its Web site as offering mail-order trees, partly because wholesalers accustomed to selling firs by the thousands aren’t interested in single-tree sales. Some smaller farms that have advertised mail-order trees online have found the sales process laborious: taking orders by phone, filling out labels, squeezing trees into boxes, then arranging for UPS or Fedex pickup. In Newburgh, Maine, the Nutkin Knoll Farm wants to “whittle down” its online sales, says owner Len Price, because the process has kept him working long nights in the barn during the heaviest days of the season.John Brussock designed a site where consumers can choose a size and type of tree, make a credit-card payment, and designate a shipping date. He also set up a fulfillment operation, including label machines and big, tree-sized boxes by the hundreds, at the family retail lot near Chicago. A few days before Thanksgiving, he launched a Google ad for DeliverMyChristmasTree.com.A six-foot Fraser fir from Mr. Brussock’s Wisconsin farm could have arrived at a door in New York City for about $95, including a $30 shipping fee, along with a disposal bag that tree lots rarely provide.At the start of the season, he had hoped to sell 1,000 trees online. He sold only half that number. But industry experts say 500 trees represent a tremendous debut for an online operation, likely making it one of the largest online tree services nationwide. After several years of online sales, for instance, Rocks Christmas Tree Farm in Bethlehem, N.H., sells only about 400 trees online.Those 500 trees gave a more than double-digit percentage boost to the family farm’s overall holiday sales. And John Brussock, who as an economics major once dreamed of investment banking, now dreams of an ever-larger Christmas-tree operation, focused online. He is already preparing letters of thanks to send to this year’s customers, replete with coupons for next year, and strategizing on how to better market the business.”I think he’s forged a promising business,” says Mr. Braham, his former boss at the Chicago real estate brokerage.The elder Brussock thinks so, too. Although he isn’t ready to retire, he’s gratified to see the family farm moving into younger hands than his, and gratified as well for the company of his son. “This Christmas season was less lonely than last year,” he says.
Write to Kevin Helliker at kevin.helliker@wsj.com

By Diana Ransom What comes after the fall?As the still-feeble U.S. economy stumbles to its feet, some entrepreneurs are applying lessons from the economic crisis to new websites that provide financial information and data. The models are all over the map—as is the information they supply—and most of the sites decline to provide their traffic numbers. But founders have tapped venture capitalists for backing and are now looking for subscribers. One of the most popular models offers the ability to track the investment strategies of pros like Warren Buffett. Another seeks to give individual investors access to the same financial models that institutional money managers use to pick their stocks.What kind of legs the sites might have is another question—as is exactly how many new businesses are underway. According to the U.S. Bureau of Labor Statistics, 171,000 businesses launched in the first quarter of 2009, down more than 20% from 207,000 during the first quarter of 2008. Here, a look at some of the Web’s newest financially-oriented entrants.
1) Hedgeable

Founder: Michael Kane

After watching retail investors, himself included, lose money during the financial meltdown, former analyst Michael Kane spent a lot of time thinking about safer ways to invest money. His solution: Hedgeable.com, a web site that offers investment advice based on changes in the market, rather than standard asset allocation recommendations. Some of the services are free–including ongoing performance and risk reporting and hedging suggestions. For rebalancing recommendations, Hedgeable.com charges a $20 a month fee. Although users currently can’t make actual trades on the site– they need to sign onto their online brokerage accounts for that—Kane hopes to advance to that stage eventually, and to enlist 10,000 paying members and 250,000 users within a year (he declines to give current traffic numbers). For now, “we’ll manage their portfolios and we’ll answer any investment questions,” says Kane, who invested $40,000 in the start-up.
2) KaChing

Founder: Daniel Carroll

What is the investing strategy of a so-called genius worth? In KaChing.com, former trader Daniel Carroll is betting that people will pay 1.25% of funds managed for access to investment strategies of investors who have passed a test administered by KaChing.com. Upon signing up, users choose one of the site’s 10 pros—currently, they include a bio tech expert, an investor who specializes in growth stocks and Carroll himself. Since launching in October, the experts’ track record has varied from 200% (the bio tech guy) to just 6.4% (Carroll). The fee is less expensive than a traditional domestic equity fund, which charges an average 1.39%. KaChing.com pays the experts 75% of the fees they generate and keeps the balance for the site.Carroll, who launched the site in October, has raised $10.5 million from investors to fund KaChing.com up. So far, he says he has $4 million under management and 420,000 users. He says the test administered to the advisors is rigorous, but in the case the strategy of an advisor goes awry, or he or she strays from her strategy, the site sends out an alert to investors. “When a lot of people buy mutual funds, they buy the brand; Most of the time, they don’t even know who’s managing their money,” he says.3)
Tracked.com

Founder: Michael Yavonditte

While there are many sources for investors looking for free or cheap information on publically-traded companies, there tends to be is less availability for private firms. At the month-old Tracked.com, users can read-up on the news and activities of any person or company, including those that are privately-held. Free to users, the site also operates as a social network. So users can not only learn that Larry Ellison, the CEO of Oracle, earned $48.42 million in 2008, they can also share that information with their colleagues.The downside: the information is only as good as Tracked.com’s sources, says founder Michael Yavonditte. “We get information from many, many different places including government sources but don’t disclose them all,” says Yavonditte. “Our data is as accurate as the original sources some of which may, from time to time, contain inaccuracies. We encourage our users to notify us of inaccuracies which we try to fix right away.”Tracked.com is still in beta and won’t launch officially until January or February, but Yavonditte says it is available to users now. He says he has raised approximately $12 million to operate the site, and plans to generate revenue through advertising.
4)

Trefis

Founder: Manish Jhunjhunwala
Want to know how much the iPhone contributes to Apple’s stock price? Such information is typically hard to parse, but a new website run by engineers from MIT will try to provide the answers. Dubbed Trefis.com, the site uses interactive modeling tools to allow users to “develop a feel for how relevant a certain driver is to the business,” says Manish Jhunjhunwala, Trefis’ founder.The site, which is currently free, ultimately will add polls of product experts and company employees to supplement information provided by the interactive modeling tools. When that happens, users will be charged yet-to-be-determined fees.
5)

AlphaClone

Founder: Mazin S. Jadallah
AlphaClone.com thinks it knows what Warren Buffett is thinking. How? It sifts through public filings of over 200 high-performing institutional investors and hedge funds to track the strategies of investors like Buffett and Robert Kemp—and charges subscribers between $29.95 and $99.95 a month for access to the information or “clone.” (To ensure that a new portfolio based on the stock ideas of one or more fund managers is worthwhile, AlphaClone back-tests the so-called clones.)Like Hedgeable.com, AlphaClone, currently doesn’t have the capability to allow investors to trade on its platform, but the site is registering with the SEC to make that possible. Once investors are able to trade on the actual site, AlphaClone will charge those who purchase investments through the site an asset-based fee of 1% to 1.5%. Mazin Jadallah, the site’s founder, declines to say exactly how many users the site has, he says it is in the thousands, with hundreds paying for information.
6) Name:SharesPost

Founder: Greg Brogger
Back in the heyday of initial public offerings, companies often managed to go from hanging out a shingle to IPO in ten years or less—Google, for example, took six. But as that market has dried up, the length of time to create a public company has stretched out to 11 or 12 years, says Greg Brogger, a former securities attorney. Since most venture capital funds have 10-year terms, according to Brogger, the gap between investment and return is sometimes tying up VC funds. With Sharespost.com, Brogger is seeking to capitalize on what he calls “a fundamental mismatch” between venture capital and start-ups. The site, which launched in June, allows investors accredited by the SEC to buy and sell each others’ shares, which theoretically frees up VC funds to be applied elsewhere.Brogger put $500,000 of his own money into sharespost.com and received the same amount from an investment group. To buy or sell, users pay a monthly subscription fee of $34. Just reading the site is free. Brogger projects he will have about 11,000 subscribers by the end of the year. Write to Diana Ransom at dransom@smartmoney.com

By Pui-Wing Tam After a dismal 2009, venture capitalists are preparing to ramp up their investments, injecting much-needed cash into start-ups.Some venture-capital firms have loosened their purse strings in recent weeks and are starting to invest new money. That has resulted in several deals, such as last month’s $52 million infusion into social-networking advertising and software company RockYou Inc. and the $57 million invested in online textbook-rental service Chegg Inc. In addition, many venture capitalists say they have been meeting investment bankers and working with their tech start-ups on filing for initial public offerings next year.”When the year started it couldn’t possibly have been worse,” says Geoff Yang, a general partner at venture firm Redpoint Ventures in Menlo Park, Calif. “Now there’s a significantly more optimistic view” in the venture industry.Chegg Chief Executive Osman Rashid says it took just 30 days or so for the Santa Clara, Calif., start-up to raise its latest round of venture capital, which it announced in mid-November. With the money, Mr. Rashid says the company, which has raised more than $160 million since its 2005 founding, plans to double its work force next year and expand the number of colleges it serves. Chegg currently has close to 100 full-time employees, he says.Venture capital firms invest in young companies with the aim of profiting later when those start-ups go public or are sold. Their recent activity is a turnabout from what has been a challenging year for the venture-capital industry. Hit by the financial meltdown and recession, many venture capitalists scrambled in 2009 to shut down their weaker investments and conserve cash. New investment activity declined, and profits from IPOs and acquisitions were few and far between.Venture capitalists had invested just $14.6 billion into start-ups through the first three quarters of 2009, down from more than $25 billion in the same period in 2008, according to research firm VentureSource. And even with more investments unfolding in the fourth quarter, it’s unlikely the venture industry will match the $31 billion invested for all of 2008. At the same time, companies backed by venture capitalists raised just $683.4 million through IPOs in the first three quarters of 2009, according to VentureSource. While that was more than the $550.6 million that was generated from IPOs of venture-backed companies in 2008, it remained far off the $6.8 billion that was produced in 2007. And mergers and acquisitions of venture-backed start-ups in the U.S. returned $9.1 billion in the first three quarters of 2009, down 55.6% from the $20.5 billion that such deals generated in the same period in 2008.”This year will go down as one of those years that the venture industry will just be glad they managed to get through,” says John Steuart, a partner at Claremont Creek Ventures, an Oakland, Calif., venture firm.The venture industry only began stepping up its activity late in the year after the economy and stock market showed signs of stabilization. Redpoint’s Mr. Yang says that helped lead to a flurry of sales and IPOs of some of his firm’s venture-backed companies, including a $405 million sale of video-conferencing company LifeSize Communications Inc. to Logitech International in November and an IPO of security-software company Fortinet Inc. that same month.
Tom Baruch, a venture capitalist at CMEA Capital, says that with the IPO window now appearing to open, he expects up to half a dozen of his firm’s start-ups to file to go public in the foreseeable future. He says he’s been spending about a third of this time working with the start-ups to meet investment banks that would help lead an offering and is advising companies on pricing and other IPO-related processes.”We were getting zero phone calls” from investment banks about taking companies public six months ago, says Mr. Baruch, who adds that 2010 could shape up to be the busiest IPO period for his firm since 2000. “Now we’re getting phone calls constantly.”Other venture capitalists say they expect to ramp up their investment pace after a restrained year and are particularly looking at opportunities in tech sectors such as social networking, mobile technologies, health-care technology and clean technology.Some start-ups have had a harder time raising money. Online ad technology maker LiveRail Inc. raised just $1 million in June from its existing investors, but had been seeking more earlier in the year from venture capitalists.Now the start-up is “opportunistically” looking for more capital, says LiveRail executive vice president Niccolo Pantucci. “The doors are open for deals, but venture capitalists are still cautious,” he says. Claremont Creek’s Mr. Steuart says his firm spent the first half of the year focused on ensuring its current start-ups would make it through the recession. Only in the past few months did the venture firm begin “telling our network that we’re actively looking for new projects,” he says. Standish O’Grady, managing director at Granite Ventures, says his venture firm typically makes seven new investments annually but was more cautious this year and will have closed six new deals by year end. In some cases, it took five to six months to conduct so-called due-diligence investigations on a new investment, far longer than it would normally take, he says.Next year, however, he figures the firm may do eight deals—or even up to 12—given that valuations on start-ups haven’t yet returned to frothy levels. “If we found 12 deals, we would figure out a way to make them,” says Mr. O’Grady. Write to Pui-Wing Tam at pui-wing.tam@wsj.com

By Teri Evans When Andrew Schuman bought Hammond’s Candies in 2007, the nearly 90-year-old candy company was operating in the red. Mr. Schuman, who says he knew nothing about the candy business, soon learned that an assembly-line worker, rather than an executive, had dreamed up the design of the company’s popular ribbon snowflake candy.It was an “aha” moment, he says. “I thought, ‘wow, we have a lot of smart people back here, and we’re not tapping their knowledge.’ “So last year Mr. Schuman decided to offer a $50 bonus to assembly-line workers who came up with successful ideas to cut manufacturing costs.”They’re the ones making and packing the candy, so I thought they probably know how to do things better and more efficiently,” says Mr. Schuman, president of the Denver, Colo., company, which has about 90 employees.The informal idea program, which is open to all Hammond’s Candies workers, has handed out more than $500 in employee bonuses since it began last year. One worker suggested a tweak in a machine gear that reduced workers needed on an assembly line to four from five.Another employee devised a new way to protect candy canes while en route to stores, which resulted in a 4% reduction in breakage. “It’s these little tiny things that someone notices that help us in the long run,” says Mr. Schuman, who adds that the company was able to earn a profit this year.As more entrepreneurs turn to employees for innovation to gain even the slightest advantage in a still-sluggish economy, many are discovering the usefulness of cash incentives or other rewards to encourage workers to come forward with ideas. Particularly for small businesses with limited resources, it’s a relatively cheap way to gather “lots of ideas and get people proactively thinking about what would make the product, service or company better,” says David Hsu, entrepreneurship professor at the University of Pennsylvania’s Wharton School.
Mike Hall, chief executive of Borrego Solar Systems in San Diego, introduced two quarterly employee contests this year, each with a $500 prize. Beyond the competition, the company’s 55 employees are rated on innovation in their annual reviews.One contest seeks the best business innovation, which Mr. Hall says must be formalized on paper to include the problem the idea solves, as well as its costs, risks and benefits.The other competition rewards the best “knowledge brief,” which requires employees to share valuable information that can benefit the company as a whole. For example, one worker won for creating a glossary of acronyms in the solar industry.”It accentuates the importance of disseminating knowledge and trying not to hold it in silos,” Mr. Hall says. Winners are determined by a companywide secret ballot. Prof. Hsu says finding unique ways to reward employees for their ideas is a way to foster esprit de corps. “It’s why a lot of people work for small businesses in the first place; there’s a closer connection in the effort they put forward and the final product,” Prof. Hsu says.
Jared Heyman, founder of Infosurv, a market-research firm in Atlanta, says his company has long turned to employees for business ideas. “In every industry, as soon as one company creates an innovation everyone else is then playing catchup,” he says.Five years ago, Mr. Heyman began awarding a $150 restaurant gift card every quarter to the employee with the best business idea. One employee won for developing a technology innovation that helped the company retain a major client that was about to jump ship. “The [ideas] program has paid for itself a thousand times over,” Mr. Heyman says. “In terms of cost savings, revenue enhancement and efficiencies, it’s certainly in the six-figure range.”This year, he upped the ante with a second contest, 100 Days of Innovation, in which the company’s 15 employees have to come up with a total of 100 innovative ideas by year’s end in order to each receive a $100 reward. Employees write their ideas on post-it notes and stick them on the “Innovation Board,” created to provide a visual reminder.”I think a lot of folks are motivated by the fact that if we fall short nobody wins anything,” Mr. Heyman says. “It reminds everybody that we work together and we’ll succeed or fail together.”

By Emily Maltby The Senate voted this weekend to temporarily extend funding for two popular stimulus provisions that reduced fees and boosted guarantees on Small Business Administration-guaranteed loans.The provisions, which helped bolster small-business lending over the past year, had run out of funding in late November. With the new extension, included in the Defense Appropriations bill, the government’s maximum guarantee on SBA loans is restored to 90%, compared to pre-stimulus levels of 75%. Fees that the agency normally changes banks are also waived. “Small businesses have been left in limbo since the funding ran out,” said Mary Landrieu (D-La.), one of the senators who requested the extension, in a statement. “[The legislation] will provide a lifeline to small businesses in need of credit.” The provisions, however, are only extended through February. Lenders and small-business advocacy groups will have to wait on another piece of legislation – the House’s Jobs for Main Street Act, which passed in the chamber last week – for the provisions to be extended through next September.Access to credit, with or without the stimulus provisions, has remained a problem for Main Street businesses. “The conventional credit market will not near normal until sometime in 2011 because the typical small business will walk in with negative trends on his financial statement,” said Tony Wilkinson, president of the National Association of Government Guaranteed Lenders in Stillwater, Okla. “But that’s why the SBA programs are important, because lenders can say, ‘Hey, this is a survivor who will probably make it.’”The provisions were originally enacted as part of the Recovery Act in February 2009, and have been widely credited with drawing banks back to the small-business lending arena. SBA Administrator Karen Mills called the increased guarantee and reduced fees on SBA loans “a powerful combination” that has already directed $16.5 billion to small-business owners and brought more than 1,200 lenders back to SBA loan programs.After the SBA announced in mid-November that funding had nearly drained, lenders acted quickly to approve as many loans as possible under the stimulus provisions. In one week, the SBA received a surge of loan applications, forcing the agency to create a waiting list of 1,069 small businesses seeking $530 million in loans. The extension should move all of those businesses out of the queue, says SBA spokeswoman Hayley Matz. “As we get to the end of February, we will implement the queue again as a way of orderly winding down the process.” Next week marks the end of the SBA’s first fiscal quarter. Even if the loan volume has increased for the past three months, credit is still not easy to come by, many business owners say. Earlier this month, President Obama publicly addressed how the credit crunch has impacted small businesses and pledged to institute programs, including the extension of the higher guarantees and waived fees, in order to propel lending. He has also outlined a plan to use TARP funds, though details of that program are still pending.
Janet Crenshaw Smith is skeptical that government programs will help her score a loan. Even before the stimulus funding ran out, she was having trouble at the bank. Her company, Ivy Planning Group LLC, a 19-year-old consulting and training firm in Rockville, Md., had its $750,000 credit line cut off from Wachovia about 12 months ago. Ms. Smith depended on the line when clients failed to pay within 90 days. The bank expanded the line of credit year after year, leading her to believe that the line wasn’t in jeopardy.”I thought that would never happen to me; I thought I was special,” Ms. Smith says. “I went nuts when I got the letter.” She has had to scrutinize her cash flow since then, particularly after she lost some large Wall Street clients during the worst months of the recession. Although she now feels ready to hire and launch new training products, she’s hindered without the cash. The next stop, she says, is her community bank, although she’s doubtful. “Their guidelines may be too tight,” she says. “But this is my opportunity to capture market share because many of my competitors are long gone and won’t be back.” Write to Emily Maltby at emily.maltby@wsj.com

By Colleen DeBaise
Adapted from the upcoming book THE WALL STREET JOURNAL COMPLETE SMALL BUSINESS GUIDEBOOK (Three Rivers Press, Dec. 29, 2009).
Technology has made it easier for business owners to take the office wherever they go. Cell phones, laptop computers and wireless devices allow many entrepreneurs to strike a compromise: they can get away but still be on call as needed.But here’s the problem: constantly checking your BlackBerry and taking work-related calls while on the beach or the ski slopes ruins many a relaxing moment and causes friction with loved ones.Here are some smart ways to use technology, without ruining everyone’s fun:• Set aside specific times of the day (such as once in the morning and then once in the evening) to check, and honor those. Parents of young children, for instance, often get up before the kids are awake, to tend to work matters. Above all, resist the urge to frequently read e-mails or make work calls.• Stick to the basics. Leave the fancy headsets or videoconferencing technologies at home. By limiting the number of work-related gadgets you bring, you effectively limit how much work you can do.• Before you leave home, make sure the devices you do bring are working. Don’t waste time on vacation fiddling with a faulty laptop or signalless cell phone. Check hotels ahead of time to see if they provide high-speed Internet connections. Bring adapters as needed for overseas travel.For more tips, click here to read “How to Take a Vacation.” Write to Colleen DeBaise at colleen.debaise@wsj.com