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Local governments’ subsidies for area Chambers of Commerce, which help small businesses with various services, are getting more scrutiny from local officials, with some cutting them back, according to a report over the weekend by the Salt Lake Tribune.

The article asks whether Chambers of Commerce deserve taxpayer money, and what role should public entities play in supporting organizations whose purpose is to advance private-business interests.

In Utah, many are expressing frustration with the cushy deals Chambers of Commerce are getting from cities. The South Salt Lake Chamber, for example, receives $50,000 a year from the city, plus free office space. “Obscene is the word for it,” says former Mayor Wes Losser, who points out that entrepreneurs, not taxpayers, should support the business association. In his role, he penciled in a zero in his budget for the Chamber every year. Other cities in Utah also are getting 35,000 to $60,000 per year in funding.

Chamber supporters say that these government payments help support economic development and sustain area businesses in a tight economy. Chamber initiatives encompass such efforts as supplying training for small businesses, publishing business directories, sponsoring community events and serving as the welcome mat for new businesses. “If we’re able to help the businesses become stronger and stay here and be profitable, it will ultimately mean more revenue to the city,” Stacey Liddiard, president and chief executive of the South Salt Lake Chamber, told the Tribune.

Other Chambers are being responsive about taxpayer funding. In South Jordan, Utah, the chamber said that it will no longer seek a city subsidy; instead, the group is offering a fee-for-service contract to help local businesses. Before the change, taxpayers provided 44% of the chamber’s budget. “We don’t want a subsidy,” says Paul Pugmire, acting president of the South Jordan chamber, told the Tribune, as part of the chamber’s plan to be self-sustaining.

Should cities be supporting local Chambers of Commerce? Or are there better ways to support local businesses?

Photo: Associated Press

The confirmation hearing for Karen Gordon Mills, President Obama’s choice to lead the Small Business Administration, is set for Wednesday in the Senate’s Small Business and Entrepreneurship Committee.

Some in the small-business community wondered when her confirmation hearing would begin, considering the agency has received much attention in recent weeks. The Obama administration unveiled a new program recently to spend up to $15 billion buying up SBA-backed loans on the secondary market along with providing stimulus money to reduce SBA loan fees and other program initiatives. The agency has also come under scrutiny, with a new Government Accountability Office report showing the agency’s HUBZone program, which helps provide federal contracts to businesses in low-income communities, is rife with fraud.

It’s not that unusual, however, for a newly appointed SBA chief to not be confirmed until the April after Inauguration Day.

Some small-business advocates criticized Ms. Mills’ appointment, given her background as a venture capitalist (read more about her experience here). They would rather see someone with experience running a small business, rather than experience mostly working with high-growth firms. Others believe Ms. Mills’ background in funding high-growth firms might allow her to help the agency assist those businesses better.

Darryl K. Hairston, SBA’s acting administrator, said in an interview with The Wall Street Journal last week that he isn’t sure what his role will be once the new administrator is confirmed.

Readers, do you think Ms. Mills seems a good fit to lead the SBA, given her experience?

- Some ways to find business leads using Twitter. Among them: Using the advanced search function and setting up RSS to monitor other conversations. [DuctTapeMarketing.com]

- The state of black entrepreneurship in the U.S. is bleak, researchers say. [Entrepreneur.com]

- We mentioned this week how the bottled water industry is getting some flack for being environmentally hazardous. Some companies are now fighting back by introducing - ta-da - boxed water. [FastCompany]

- Treasury Secretary Timothy Geithner proposes imposing stricter rules on private-equity and venture capital firms. [WSJ]

- Who are the five most interesting entrepreneurs of the past 30 years? Carl Schramm of the Kauffman Foundation names his picks. (Hint: Think low-cost airlines and minority-owned TV networks) [Kauffman]

Readers, any other relevant or interesting small-business news we missed this week?

Would heavier regulation of the credit card industry be a bad or good thing for small businesses?

A new 34-page report by the Small Business and Entrepreneurship Council argues that government regulation of the credit card industry ultimately hurts small businesses, by making it harder for card issuers to stay competitive and offer the most flexible terms and best rates to businesses. The report focuses on recent proposals for government regulation of the interchange fee – the fee credit card companies charge merchants on every card transaction. But the report’s bottom-line message is that any government regulations of the credit-card industry limiting how credit card companies do business will ultimately be harmful to the small firms that use them:

“The profits made in the credit-card industry encourage the expansion of cardholders and merchants in the network, as well as investment and innovation, which in turn benefit both consumers and businesses.”

The report struck a nerve in me because so many small-business owners I’ve spoken with in recent weeks are angry with credit card companies right now and wouldn’t mind seeing the government step in and provide them some protection. Many (even ones with good credit ratings) have seen their card limits slashed at a moment’s notice, their rates jacked up or their cards closed by the issuer – sometimes with what seems like little justification. They would like to see the card industry held more accountable for how it treats its customers – especially now that businesses so desperately need access to credit.

What’s more, many merchants – small and large — support regulating the interchange fee, because they are the ones who pay it. In a recent editorial in the Deseret News, Jonathan E. Johnson III, president of Overstock.com, argues that big credit-card companies like Visa, American Express or MasterCard offer little explanation for why they collect the fees from merchants they do and that merchants don’t have the power to negotiate or fight them.

Mr. Johnson writes: “I’m not against the credit-card companies making a living. But they routinely agree to increase interchange fees without any justification or transparency. Not only that, but when somebody commits credit-card fraud with one of their credit cards, they push the cost to the retailer — despite one of the stated reasons for the huge interchange fees being to guarantee that retailers get paid. But there is no guarantee; retailers lose these sales dollars because if there is one credo the credit-card companies live by it is this — if they can take money from us, they will.”

Readers, do you think the government should regulate the credit card industry more or less? Do you think it should put limits on the interchange fee in particular?

Photo: Getty Images

Members of Congress continue to toss around ideas to help small businesses dig out of the recession. The latest suggestion: appoint a special U.S. trade representative to focus on the needs of small companies.

The idea was floated by Senators Mary Landrieu, D-La., Olympia J. Snowe, R-Maine, and Chuck Schumer, D-N.Y, who wrote a letter to U.S. Trade Representative Ronald Kirk asking him to add an assistant to help out with small-business issues.

“Increasing exports among small firms is good not only for small businesses but also for the economy and our nation,” Sens. Landrieu, Snowe and Schumer said in the letter, which also pointed out that very few U.S.-based small businesses currently export. If more did, the senators surmised, it could help chip away at the country’s trade deficit.

“We believe that during trade negotiations, a small business expert in the highest realms of trade policy is necessary to ensure the needs and concerns of small businesses are addressed,” the senators said in the letter. “A high-ranking advocate for small business is vital to removing trade barriers and ensuring that small businesses are given systematic consideration in trade policy.”

We’ve written about small businesses that find there’s more opportunity overseas than close to home. But with the dollar volatile and the world economy shaky, selling abroad certainly is no panacea. Selling abroad can be expensive, and it takes a lot of ground work to learn each country’s rules and customs. And, while government support is nice, for a company to export successfully it takes real demand for the products or services.

Readers, do you think a trade representative focused on small exporters is a good idea? Or is this lip service from politicians?

Small businesses’ health-insurance woes have been getting some attention the past couple weeks, and raising hopes that the Obama administration will soon do something about them.

A new Government Accountability Office report finds that the small group health-insurance market – generally defined as covering businesses with up to 50 employees – has become much more concentrated among fewer insurers.

The GAO report analyzed 39 states’ health-insurance markets and found that in 34 of the markets, the top 5 insurance carriers accounted for more than 75% of the small-group market, compared with 26 states among 34 analyzed in 2005 and 19 among 34 states in 2002. What’s more, the median market share of the largest small-group insurer in each market increased to 47% in 2008, up from 43% in 2005 and 33% in 2002.

The worry, of course, is that more concentration leads to less competition and will only exacerbate price increases for small companies, which have experienced double-digit increases annually in recent years. Many small employers have dropped health insurance altogether, with now only about half offering it, according to recent studies.

Earlier this week, the National Small Business Association launched a new Web site – www.HealthReformToday.org – highlighting the health-insurance problems small businesses face. The site compiles news and studies with health-insurance information and statistics pertaining to small companies. It also includes testimonials from business owners who’ve struggled to afford coverage, or dropped it, and links to current health-insurance-related legislation.

Last week, at a House Small Business Committee hearing, members discussed health-care reform and plans to tackle it in President Obama’s budget. Nydia Velazquez said they were confident the issue would be addressed soon, but says it’s vital the government consider the unique needs and challenges of small businesses. “The needs of small firms and small medical practices are different from those of big companies, and it is critical that we not push forward with one-size-fits-all reform,” Rep. Velázquez said in a statement. “If it is properly crafted, health-care reform will be a relief to small providers and to small firms, bringing greater efficiency to the system and reducing costs for all Americans.”

Readers, are you hopeful health-care reform is soon on the way? What could be done to help small businesses in particular?

Photo: Associated Press

If you launch a public-awareness campaign about an important environmental cause – and then generate $6 million in sales from it — are you a greedy entrepreneur or a selfless environmentalist? Or both of the above?

That’s the question Mark DiMassimo and Eric Yaverbaum are asking.

About 17 months ago, the New York entrepreneurs and marketing professionals launched Tappening.com, a Web site that tries to expose the environmental and potential health hazards of drinking from disposable plastic water bottles. The site includes links to news articles, studies, and online videos about how plastic water bottles are harmful to the environment and to consumers’ health. It also includes extra features, such as a database where users can find quality reports on tap water in their state.

Mssrs. DiMassimo and Yaverbaum claim they launched the campaign out of passion for the cause. But to cover the costs of the marketing campaign, they hoped to sell 39,000 reusable water bottles that they had made. They put a lime-green “Buy Now” button on the top of the Web site where site visitors could buy their bottles for $14.95 to $18.95 plus a $3 shipping fee.

But excitement for their viral campaign – and their water bottles – was beyond expectation. They sold 39,000 water bottles within two days and currently have sold more than 400,000 of them, reeling in $6 million in sales thus far. They received tons of media coverage and celebrities including Cameron Diaz were spotted sporting a Tappening bottle. More than 7 million people have visited the site.

In recent months, however, Mr. Yaverbaum says they’ve been criticized increasingly by consumers and media, such as talk radio hosts, for making so much money off what they were positioning as a cause. Mr. Yaverbaum denies they started Tappening to generate revenue, but says, even if they had, there’s nothing wrong with that. “If I was doing it for the money, would that be such a bad thing?” he said in a phone interview. “Wouldn’t that be a really good business model to create shareholder value while also doing good for society?”

He says they plan to continue growing Tappening and have thus far funneled all $6 million back into it, though still adhere to the original public-awareness mission. Tappening currently has about 30 employees.

To play off the criticism – and yes, generate even more publicity for their site — Tappening.com last week posted an online poll where visitors could vote on whether the businessmen are “Greedy Entrepreneurs,” “Selfless Environmentalists” or “Both.” Just under 50,000 people have voted so far. About 12,000 think they’re greedy, 13,000 think they’re selfless and 25,000 think they’re both.

Readers, how about you? Are they greedy, selfless or both? Or have they stumbled on a smart business model that more entrepreneurs could learn from?

Photo courtesy Tappening.com

Fed up with seeing local small businesses being ravaged by the economic downturn, some people are taking matters into their own hands. They’re trying to reverse the fortunes of mom-and-pop stores by becoming more organized in “buying local.”

– In Fort Myers, Fla., people driving by Clancey’s Restaurant saw this huge sign outside: “Support the local economy. Patronize locally owned businesses.” Local businesses there say that for every $100 spent at a chain or national business, only $14 stays in town, but when spent at locally owned businesses, the amount triples to $45. However, code enforcement officials made the restaurant take the sign down. The restaurant is currently working to get a permit to put it back up.

– A food bank in Humboldt County in California is trying to save the local economy with food stamps. Food for People is rolling out its “Bring a Million to Humboldt County” campaign, which aims to enroll everyone eligible into the food-stamp program. Businesses in the county could see an extra $12 million boost circulating in the local economy this year as food-stamp dollars get spent in local stores and local farmers’ markets. A study by the U.S. Department of Agriculture’s Economic Research Service found that every dollar spent in food stamps generates $1.84 in economic activity; another study by Moody’s Economy.com found that food-stamp dollar spending generates $1.73 in economic activity. Even Congress has realized this: the economic stimulus package passed earlier this year is giving Humboldt County an additional $6.25 million in food-stamp benefits, which could generate some $11.5 million in local economic activity. But the stigma of food stamps could hamper those plans: only 46% of those that are eligible in the county participate, translating to $14 million in food stamp money that goes unused annually.

–In Chicago, two entrepreneurs established a Web site this month, SupportREconomy.com, to sell $2 green “R Local Stimulus” wristbands to benefit designated 10 small businesses and charities in the area. The grassroots effort aims to donate 20% of the profits to local pharmacies and grocery stores. Since the launch in mid-March, 250 wristbands have been sold, said Joana Fischer, the co-founder.

– A trio of small-business owners in Detroit is creating a citywide currency called Detroit Cheers, $3 denomination bills. They’ve gotten the cooperation of more than a dozen city merchants to agree to accept Detroit Cheers as real money. Apparently, Detroit’s not the only one reviving the tradition of thousands of communities creating local currencies to spark hometown commerce. The Detroit News reports that the Detroit Cheers program is just one of 75 local currency systems that have sprung up recently in the U.S. Legal scholars say this is all legit, since the made-up bills don’t resemble federally issued money. People typically exchange federal dollars with the “local currency” at local banks, use that money to spend at local businesses, which then convert that money to real dollars at the bank. So far, the businesses that are participating in the Detroit Cheers program include a building and furniture design firm, a dog day-care center, a graphics designer, a carpenter, a nonprofit and several restaurants and bars. In nearby Traverse City, Mich., its local currency program is in its fourth year, currently bringing a total of $13,000 worth of currency circulating in the community. In another part of the country, BerkShares currency in the Berkshires area in southern Massachusetts has nearly $2 million worth of local currency since its inception three years ago.

Readers, what other local efforts have you heard about?

Small-business owners will talk your ear off about the dangers of relying on one big customer to stay afloat. But what about relying on one service provider?

A columnist for Slate’s Big Money blog counts all the ways his business relies on Google - and it takes a while. First, there’s AdSense, Google’s online ad program from businesses. Then there’s Google Analytics, for measuring traffic to the company Web site. The author’s company used a service called FeedBurner to manage RSS feeds, and that was bought by Google.

And it doesn’t end with online products and services - Google also helps with day-to-day tasks. The company uses Google’s free Web-based document service Google Docs instead of Microsoft Word and Excel. And it recently switched to Gmail, Google’s free online email service. It beats having to manage and pay for a sophisticated server and local area network, says author Jonathan Weber, the founder, publisher, and CEO of new media company New West.

Mr. Weber is appreciative of what Google has done for his small business: no more servers, no need for IT help, less software. Still, all of this time with Google makes Mr. Weber a little bit nervous, he says. If Google decides one day it’s time to start charging for these free services, Mr. Weber will either have to make a quick switch or be at the mercy of Google’s whims.

Then there’s the issue of Google’s tremendous dominance in the online world. “It can almost make or break a site like NewWest.net by the way it treats us in search results and in Google News,” Mr. Weber writes. “At a minimum, it has the ability to peer deeply into my business; I trust it doesn’t actually do that, but still.”

Readers, how much does your business lean on Google - or another big service provider? Are you looking for different options?

In today’s recession, many small businesses may think it’s wise to tie their marketing to money and value to appeal to cash-strapped consumers. But perhaps they should tie it to something else of considerable value: time.

A new study by researchers at Stanford Business School, published in the Journal of Consumer Research, found that it’s generally far more lucrative for businesses to reference time and personal experiences in their marketing than focusing on monetary value.

“Because a person’s experience with a product tends to foster feelings of personal connection with it, referring to time typically leads to more favorable attitudes—and to more purchases,” says Jennifer Aaker, a Stanford marketing professor and one of the co-authors of the study, according to an article on Stanford’s Web site. One example the researchers point to is Miller beer’s “It’s Miller Time” – compared to say Stella Artois’s “Perfection has its price.”

To test their theory, the researchers set up a lemonade stand — staffed by two six-year-olds for authenticity — and tested the effect of three different signs. The first sign said “Spend a little time and enjoy C&D’s lemonade.” The second one said “Spend a little money and enjoy C&D’s lemonade.” And the third one said “Enjoy C&D’s lemonade.” Customers were asked to pay any amount between $1 and $3 for a cup of lemonade and then were questioned afterward about their impressions of the lemonade.

The experiment showed that the sign that stressed time brought in twice as many passersby who ultimately paid twice as much than when the signing stressing money was posted. Those customers who bought with the sign mentioning time also reported liking the lemonade more than the others.

In another experiment, the researchers asked college students about their Apple iPods. One group was asked how much time they spent on it and another group on how much money. Those asked about time expressed liking their iPod a lot more than those asked about the money spent on it.

The researchers uncovered one exception to the rule. When companies market items purchased for prestige, such as luxury cars, jewelry or designer jeans, focusing on the monetary value can be more effective than time and experience. They think it’s because the owners value just owning those products more than the time spent with them.

So what are the takeaways for real businesses? Prof. Aaker told Stanford GSB News that the results suggest businesses should spend more time thinking about how their product or service improves the lives and happiness of their customers and draw their advertising and marketing campaigns around those attributes rather than tying marketing to money.

But even just using the word “time” in marketing, and steering clear of mentioning money, can make a difference. “In the context of a real business, conducted among a variety of consumers, this experiment shows that merely mentioning time rather than money in a product’s marketing materials can make the very same product more alluring and better liked,” the authors note.

Readers, have you found focusing on time and experience is more effective than focusing on low cost or value?

Photo: Associated Press