Senate may drop the soap (maker)

About six years ago, there was a big fuss about the CPSIA, a law that was written to sharply reduce lead in clothing, toys and other items made for children under 12. Why lead? Lead poisoning causes developmental and neurological damage in young children, including by breathing dust from peeling lead paint.

I made some noise about the law as originally passed because it would force the makers of handmade childrens’ items out of business – and a lot of those businesses exist here in Montana. It wouldn’t have put them out of business because their products contained lead, but because of the costs of per-batch independent lab testing to prove they were lead-free.

The law passed unanimously. Imagine that happening today.

It passed in response to the recall of millions of lead-tainted toys in 2007-2008. However, there was an uproar from makers of small motorcycles and bikes. Lead appears in tire valve stems and other unlikely contact areas, which left them subject to the law.

The publicity resulted in a number of public forums with elected officials. In a response to my question during the Kalispell MT forum, my U.S. Representative lied to my face that he didn’t vote for the bill (the link shows otherwise). He then took the side of the youth motorcycle manufacturers (rightly so, I think) and said he’d fix the poorly-written law he’d voted for.

The law eventually got fixed, mostly, via an amendment exempting both small volume (often handmade) manufacturers – the ones who couldn’t possibly afford the testing requirements of the original law – and those reselling items they didn’t manufacture. While it didn’t save thousands of small handmade manufacturers from their losses prior to this amendment, it did stop the bleeding.

I say “fixed, mostly” because the law was amended to allow Mattel to perform their own lead testing rather than use independent labs other manufacturers must use by law. The irony? The slew of lead problems that provoked Congress to act involved millions of toys manufactured by Mattel and their subsidiaries.

What’s this got to do with soap?

I share all of that for a couple of reasons.

One, there are parallels in the CPSIA story to a new bill that could affect manufacturers of handmade soaps, lotions and the like, Senate Bill S.1014, the Personal Care Products Safety Act.

Two, there are a large number of handmade manufacturers of soap, lotions, creams, lip balms and scrubs in Montana, including my wife’s business.

Three, when the press microphones are on, there’s a high likelihood of horse biscuits along the lines of “I voted for it before I voted against it” or “My vote was a shot across the bow“, so have your biscuit filter ready.

S1014 is on the agenda of the Senate Committee on Health, Education, Labor, and Pensions, which is full of high-profile personalities, including two Presidential candidates. The needs of your small business or your employer may not mean squat in the context of Presidential candidate image makers advising these people.

Handmade manufacturers on alert

As in the CPSIA situation, an industry group has worked to provide exemptions for small handmade manufacturers. The Handmade Cosmetic Alliance (HCA) has for months tried to educate and reason with the bill’s authors and suggest that they include small manufacturer exemptions like those found in the 2011 Food Modernization Safety Act (FSMA). Despite that, these small handmade soap, lotion and cosmetic manufacturers will be held to the same standards that makers of prescription drugs and medical devices meet.

Most of these 300,000 (!) small manufacturers use food ingredients found in grocery stores, even though customers don’t eat them or use them to treat a medical condition. We’re talking about olive oil, oatmeal, sugar, coconut oil, etc. My wife buys olive oil for her creams off the shelf at Costco.

This law will force them to pay user fees that will result in higher consumer prices, plus it will add more paperwork burden by requiring them to file per-batch (10-50 units) reports. For the more successful homemade product makers, this could result in 100 or more FDA filings per month. Everyone has time to do that, right?

It’s almost tourist season. Many of the products tourists buy and take home are made and sold locally, and thus feed local families in your area. Speak now or …

Are experts cheap or expensive?

Are experts cheap or expensive?

You may not be old enough to remember the Fram guy, but he’s the perfect example of the expert who can be cheap or expensive.

The cheap expert is the one who gets paid to take care of routine maintenance that prolongs the life of your asset – in this case, your car’s engine. The expensive expert is the one who rebuilds your engine because it wasn’t properly cared for.

While there are several assumptions made there, the point is clear.

The failure to plan

You’ve likely heard the old saying “A failure to plan on your part does not constitute an emergency on my part”, often accompanied by “People don’t plan to fail, they fail to plan.

Both of these sayings describe situations frequently seen by experts in finance, legal, insurance, medical, technology, auto repair and other fields.

For example, as a long time technology guy, I’ve reminded more than my fair share of business owners to backup their files to a safe place.

Why? Because I’ve also been paid by a fair share of business owners to recover and/or reproduce their critical data because they didn’t back it up – ie: they didn’t treat it like the critical asset that it is.

LIFT

One obvious place where this causes problems for business owners is in the critical areas of LIFT – Legal, Insurance, Finance, Taxes. New business owners frequently take shortcuts here because the recommended path costs too much, or at least, appears to.

In those cases, the small business owner might make a decision between C corporation, S corporation and LLC based on a web page’s description or simply because of the cost. If they don’t consult someone who understands the tax and legal implications / limitations / requirements of each type of corporate organization, much less the long term scenarios that each organization tend to bring to the table – do they make the right choice?

Or maybe they buy accounting software and set it up using the default settings rather than having someone who understands their business structure set it up so that it fits the business’ legal and financial organization as well as its goals. And perhaps they just started using it despite a lack of corporate accounting expertise rather than using an experienced, part-time bookkeeper a couple of hours per week.

These are just hypothetical examples, but you may know someone who has taken these shortcuts.

It isn’t that business owners take shortcuts because they are ignorant or apathetic. Usually it’s because they’re under tremendous time and financial pressure.

Can you relate to that? I’ll bet at least some of your customers can.

What about your customers?

Given that, imagine a new prospect needs your expertise but instead of using you, a known expert in the field related to the thing they need help with, they “google around” and do it by the seat of their pants. Why does that happen?

One of the questions I ask new customers is “What do you sell that most of your customers should buy, but don’t?

The answer indicates a number of things, including these three:

  • It tells me one of the things that you feel is critical to the success of your customers.
  • It tells me which of those things you struggle to market, position, price and/or sell.
  • It tells me that your customers may not trust you as much as you think.

Put another way… there’s one product you sell that almost every customer would get good value from, yet you haven’t found a way to show them the value in a way that makes them want to buy it. Or you priced it incorrectly, or you packaged it incorrectly, etc.

If it is truly that important to the majority of your customers, it’s something worth addressing.

Put another way – it’s something the expert recommends, but the customer doesn’t take their advice (or doesn’t take it seriously), so they take a shortcut.

Full Circle

What’s the difference between the choice to take a shortcut that your prospect made and the one you made?

Nothing.

Let’s go back to “What do you sell that most of your customers should buy, but don’t?”

How are you positioning, pricing and selling the things that you KNOW your customers really need?

 

Disclaimer:

I am blogging on behalf of Visa Business and received compensation for my time from Visa for sharing my views in this post, but the views expressed here are solely mine, not Visa’s. Information and opinions are presented solely for informational purposes, and are not intended, nor should they be construed, as a substitute for legal, accounting or tax advice.  You should consult an attorney or tax advisor for individual advice regarding your own situation. Visit http://facebook.com/visasmallbiz to take a look at the reinvented Facebook Page: Well Sourced by Visa Business. The Page serves as a space where small business owners can access educational resources, read success stories from other business owners, engage with peers, and find tips to help businesses run more efficiently. Every month, the Page will introduce a new theme that will focus on a topic important to a small business owner’s success. For additional tips and advice, and information about Visa’s small business solutions, follow @VisaSmallBiz and visit http://visa.com/business.

Earn trust or destroy it? Your choice

Communicate
Creative Commons License photo credit: aturkus

Millions of people depend on Gmail.

Sometimes it goes down unexpectedly.

Not long ago, people all over the world were “freaking out” and saying the F word (“Fail”) because Gmail was down.

In addition to numerous posts via Twitter and other social media, here’s how Google communicated a problem when they had a major downtime (their description – the downtime was not quite 2 hours).

Think about how your business responds when there’s a problem.

Do you keep it under your hat?

Do you update your clientele frequently so they remain calm, even if things aren’t going so well.

When things aren’t going so hot, it quite often ends up being more important how you communicate with your clientele when there’s a problem.

Here’s an example that’s a bit more serious.

It got worse for the business because they handled communication poorly.

Railroaded

A few months back, Burlington Northern Santa Fe (BNSF) suddenly started buying (or trying to buy) pieces of track-side real estate in Whitefish MT (a resort/ski community in Northwest Montana) and Somers, MT (a lakeside resort area not far south of Whitefish).

No reason was given for the sudden interest in track-side land but people started talking. Conspiracy theories were abundant.

Here’s an excerpt from an early newspaper column about BNSF’s behavior:

Burlington Northern Sante Fe is up to something. The railroad giant has approached property owners in Whitefish and Somers, offering to buy their land. No one knows why, exactly, not even those who have been asked to sell. And BNSF isnâ??t talking â?? leaving entire neighborhoods apprehensive…

Eventually, residents got wind of BNSF approaching their neighbors and started asking questions. BNSF was mum about it, not even talking details with those they offered to buy out.

As a result, the residents made the natural move – they got attorneys.

Feeling the heat, BNSF decided to admit what was going on, albeit a bit too late to avoid looking a bit slimy.

By then, the tone had been set. Lying until you get caught is how things were gonna work, even if they were “only” lies of omission.

Coming clean only works in your favor when you do it upfront.

Without Grace

Not unlike W.R. Grace’s behavior in Libby MT (which echoed its earlier behavior in Woburn MA including lying to the EPA about their chemical use), BNSF had set the stage such that nothing they said was going to be trusted.

Before long, the EPA got involved and now BNSF has to do things the hard and likely more expensive way. Just like Grace, at least in Woburn.

While the BNSF and Grace situations are substantially more serious than a mere 100 minutes of Gmail downtime, that really isn’t the point.

Choice

The point is that there are two choices: Communicate in a manner that generates trust, or communicate in a manner that destroys it.

Cybercriminals are smiling

Here’s an extra guest post for you this weekend.

It comes courtesy of Knowledge @ Wharton – and it’s extra because I think it important that anyone with a computer and a business have their act together when it comes to securing their business data.

http://knowledge.wharton.upenn.edu/article.cfm?articleid=2317

It isn’t that long. Read it *now* before they steal your cookies.

FACTA: Red Flags and Milk Bones

Restless Nights
Creative Commons License photo credit: il Quoquo

Despite the fact that Blondie (our golden retriever/ husky mix) gets credit card applications in the mail, identity theft is really not something that keeps her awake.

For that matter, little does.

When we go to Wells Fargo together, they never ask for her ID.

Maybe the sad Golden Retriever eyes are what the ladies at the drive-up can’t resist. All I know for sure is that on the way home, the old girl (Blondie, that is) filets out in the backseat in Milk Bone heaven.

For us bipeds, life is a bit more demanding. We’re asked for IDs frequently, yet sometimes we aren’t asked even though we’re supposed to be.

Why, whatever do you mean?

The last time I read an American Express merchant agreement, it said something about verifying the cardholder’s identity by checking their driver’s license or similar government-issued ID.

For whatever reason, I can count on one hand the number of times that happened since 1983.

I kind of understand the thought process here. Businesses likely see that as an opportunity to offend their clientele and customers might be annoyed. Still, that’s simple enough to defuse by saying something like “I apologize Ma’am, we just want to be sure that someone else isn’t using your card”. But it doesn’t happen.

Meanwhile, identify theft increases and as you would expect, lawmakers in Washington, in the state house and eventually, in the financial industry respond with ways to combat the problem.

For example, the credit card industry has PA-DSS (and a few things they worked up prior to that).

That’s a FACTA

For everything else, there’s Mastercard. Er, I mean FACTA – the Fair and Accurate Credit Transactions Act of 2003.

You may hear it referred to as “The FTC Red Flags Rule” or just “Red Flags”.

For banks, it’s old news. They’ve been dealing with it since 2003.

Just yesterday, one of my banks called and asked me to drop in sometime so they could scan my new driver’s license (it was new last October). The scan they have shows an expired date. Apparently regs require that the ID they have on file is current. At least they are paying attention (good news).

My presumption is that a scan of your ID allows the bank to compare the scan vs. the one that tall, good-looking guy gave to the teller before attempting to empty your savings account. I don’t know if they actually do that or not.

Are you a financial institution?

You’re probably wondering how all of this impacts the small business owner. For starters, it might just make you into a financial institution.

FACTA applies to any business that provides goods and services to consumers and bills them later (mostly).

Implementation for small businesses keeps getting delayed, for what are probably obvious reasons, but they say they’re serious that the November 1, 2009 deadline is the real deal.

Definitions are funny things. Like standards, they are subject to interpretation. I don’t look upon myself as a financial institution or a creditor, but someone else just might and the same goes for you.

Here’s a quote from the FTC.gov Red Flag Rule page:

The Rule applies to ‘financial institutions’ and ‘creditors.’ It’s important to look closely at how the Rule defines those terms because (emphasis mine) they apply to groups that might not typically use those words to describe themselves.

(snip)

Under the Rule, the definition of ‘creditor’ is broad, and includes businesses or organizations that regularly provide goods or services first and allow customers to pay later.

Examples of groups that may fall within this definition are utilities, health care providers, lawyers, accountants, and other professionals, and telecommunications companies.

The definition also covers businesses or organizations that regularly grant loans, arrange for loans or the extension of credit, or make credit decisions.

Examples include finance companies, mortgage brokers, and automobile dealers or retailers that offer financing or collect or process credit applications for third party lenders. In addition, the definition includes anyone who regularly participates in the decision to extend, renew, or continue credit, including setting the terms of credit.

Because of this, I cant suggest strongly enough that you read the FTC Red Flag Rule documents (link at end of post).

Here’s another one from the Red Flags FAQ – it’s the one that gets me:

The Red Flags Rule applies to businesses that regularly defer payment until after services have been performed.

I don’t defer all of it, and I don’t do it for all clients, but it doesn’t matter because I do it in some cases for some amounts.

I wonder how many businesses that accounts for?

No Quarter for Cities & Community Orgs

Community benefit organizations (also known by the misnomer of “non-profits”) are also subject the Red Flags Rule if their business processes and billing situations fit the profile.

Even the city where you live is considered a creditor by this Red Flags Rule if they (for example) bill you after the fact for the amount of water and sewer your house or business used last month.

If they charged a flat fee for water/sewer, even if it is after you’ve used it, the city wouldn’t be a FACTA creditor. Ahhhh, those little details.

Credit cards and retainers

Thankfully, it doesn’t appear to apply to businesses who take a credit card number and charge it monthly until your balance is paid off (PA-DSS deals with that – we need to talk about that little gem as well).

Likewise, FACTA doesn’t impact businesses who collect a retainer and then credit future services against that retainer. You knew they’d exempt attorneys *somehow*, right?

While this all of this isn’t the end of the world, it will require some process refinement and it might even change how you bill your clients.

You can learn more at http://www.ftc.gov/redflagsrule

5 expensive new business mistakes and how to avoid them

Coaster
Creative Commons License photo credit: waffler

We’ve talked about how the “Stimulus Economy” is a great time to start a new business.

One of the reasons: Existing businesses in your desired market are likely to have downsized (ie: laid people off) or cut back on some activities, services or product lines that might not be their most profitable activities in some way, shape or form.

Perhaps they need a specific, expensive crew of staffers to deliver that service and while in flush times they can justify it, in the Stimulus Economy they cannot.

Maybe that means no one should do these things (or create them), but that’s an easy place to find product and service ideas. If nothing else, it might provide offshoots of those ideas that are even more profitable and worth starting a business around.

Armed with one of these new ideas (or new twists on the old ones), off you go to start a business.

Excluding the marketing, customer service and positioning things we talk about regularly…What are some of the expensive mistakes you can make?

Not following up

You’re new. You don’t have that many customers to begin with (maybe none). It should seem like common sense to keep up with them. If they start to wonder why you haven’t called, stopped in or replied to their email – it’s beyond “been too long”. Do you have a system – even if it’s on paper – for managing this process? You should.

Not hiring an accountant from the gitgo (ie: the beginning).

This seems like a luxury. The problem is that you make choices in the early days that can potentially haunt you a decade or more later particularly if you are wildly successful. LLC? C-Corp? S-Corp? Even that seemingly simple choice can make a huge difference depending on how your business is valued. Even if you only pay them now and then to do specific tasks, it’s critical to do some of these early things right the first time.

Not having a serious insurance person in your corner

In the early days, it’s not unusual to make mistakes. If you can’t avoid them, make them while being properly insured. When you talk to a prospective agent, tell them *everything* your business does and how you do it. Failing to mention that twice-a-year hayride at your guest ranch can be a one way express ticket to bankruptcy.

Not being organized

Part of this is included in the “Not following up” item and in the next one, but seriously – it’s 2009. If a yellow pad and a #2 pencil really is the toolkit for you to keep 100% on top of your business, that’s fine. Be sure to use it.

Emails, papers, phone messages, customer communications, invoices. It all adds up. A cardboard box in the corner is not the way to manage it. A two-foot-tall stack of manila folders that always seems to be scattered around the office isn’t either.

Not having a clear division of duties

If you have a small team in place, it’s easy to assume everyone knows what to do. Trouble is, that might work for 1 customer or 3 customers, but if you have 57 leads active – its impossible to keep things under control and know who is doing what and when. Result: Lost business. Lost prospects. Angry staff.

#amazonfail, Niemoller and your business

choc bunny
Creative Commons License photo credit: Asti21

First they came for the chocolate bunnies, and I did nothing because I am not a chocolate bunny.

Quite a weekend we’re having: Passover, Good Friday, Easter, the Masters and a few thousand Easter Egg hunts, to name a few.

Oh, and I smoked a pork roast that turned out totally incredible. But I digress:)

In the midst of all the holiday celebrations, worship, family time and so on, Amazon gets into the act. So much so that they are trending #1 on Twitter (you must be logged into Twitter in another browser window/tab BEFORE clicking this link, sorry but that’s just how Twitter search works).

The hashtag (ie: search term) on Twitter that is receiving all the attention is #amazonfail.

First they came for those with an Amazon rank

It’s been a while since the online bookseller stepped in it and alienated a huge number of people, but they got into the act again this weekend.

Last time it was about Amazon shafting authors who use print on demand services that weren’t owned by Amazon.

This time, it’s some or all of the “adult” community.

At first, it wasn’t clear exactly what was going on (and still may not be), but an official customer service response from Amazon indicates that they are removing sales rank data for content with adult ratings. Amazon now denies this, calling it a glitch.

A growing number of folks in the GLBT (or LGBT) community (particularly on Twitter) are noting some inconsistency of the removed ranking data, noting that it seems to apply more to content of interest to them than to adult material across the board.

No matter what your feelings about the various forms of sexuality, I should remind you about two things:

  • First, the Rev. Martin Niemoller poem, “First they came“. If your business (through you) is willing to take on a group, be careful what you wish for. Be sure of your staying power with your stance on an issue.
  • Second, while there are political and other sensitive issues here, this isn’t why I bring this up. There are business issues intertwined throughout this.

In Amazon’s case on this issue, they risk a nationwide boycott from the LGBT community. If they change their mind, they risk a boycott by other groups. If they waffle and end up somewhere in the middle, they might get both.

Yeah but this stuff has nothing to do with my business!

Not really.

It’s 2009. For no cost, anyone can get detailed info about your political contribution numbers and plot them on a Google map and do any number of things with it, including to suggest that people pay you a visit.

Are you ready for that?

If you think your personal values don’t affect your business, think again.

Every business owner will inevitably find themselves taking a side on a political, theological or similar issue at some point (probably several dozen). You need to think through how you will handle situations like this.

  • Will you bring your stance on contentious issues into your business?
  • If you become active on an issue, will it impact your business and if so, are you strong enough to stand firm when the public attaches the issue to your business? It doesn’t matter what the issue is. What matters is how you will handle it and how your staff will handle it.
  • Are you willing to deal with the fact that your staff feels differently about the issue (whatever it is) than you do? Whether you are or not, you should talk to a HR specialist or an attorney who specializes in employment law before hiring people. HR problems are a great way to lose your shorts.
  • Is your stance on an issue going to affect the clients and employees you attract? As long as you are sure of yourself, that’s the primary concern. Well, that and are you acting within the law?
  • Will your ethics on the issue in question suggest that your business ethics should be called into question?

I’m not asking nor suggesting that you temper your views or how and where you share them with others. Only you can make that decision.

Nor am I suggesting that you be hypocritical. Congruent for sure, but not hypocritical.

What I am suggesting is that you need to decide in advance if you are willing to lose your business (or a part of your business) over your stance on an issue. It’s ok either way,  just be sure of yourself before you go down that road.

Some might suggest that you’ll get more business if you show your colors. In some cases, I think that’s absolutely right. One of the easiest examples I can think of where this likely helps a business is Ian’s stance on China, human rights and his Catholic goods store.

More than anything, I am suggesting that you consider the big picture before you step onto the soapbox.

No matter how you feel, it is difficult to get the genie back into the bottle.

PS: It’s all about the malted milk eggs for me.

UPDATE: An interesting theory on what might be happening to Amazon: http://tehdely.livejournal.com/88823.html

Whether this theory is true or not, it’s a valuable lesson for system designers of social media systems, interactive/community feedback systems and the like.

Meanwhile, a bunch of tweets reference people actively tagging conservative books with keywords that might get them de-listed from the sales rank numbers for the same reason that others are being de-listed.

UPDATE: Amazon says the change in sales rankings is a glitch. In social media circles, they arent getting a lot of traction on that. Time will tell.

The force is strong with this Congress

For decades, I have avoided getting involved in politics mostly because it has a way of seriously annoying me.

As I hope you’ve noticed, I’ve also avoided getting politic-y here at Business is Personal – maybe with the exception of discussions regarding the CPSIA.

Despite my best efforts, Congress is working overtime to pull me into their world.

And then this morning, I’m talking to a prospect who asks “Do you get involved in politics much?” Hooboy:)

Never fear, however. BIP is not here to be political. I will avoid it at every possible occasion.

Regulation is necessary

Regulation is necessary and anarchy is a pretty bad alternative. The problem is that Congress seems to be working overtime to destroy small businesses, intentional or otherwise.

Those that deserve it, so be it. Most do not, IMO.

It seems fairly obvious that we can legislate the loss of jobs a whole lot easier and faster than we can create them via legislation.

Almost 30 years ago, the Regulatory Flexibility Act (RFA) was put in place to protect small business from a “substantial impact” from new rules put in place by agencies as a result of new Federal laws.

The name sounds all nice and cuddly, doesn’t it? “Regulatory Flexibility Act” Awwww:)

The law requires an analysis of any new agency rule to make sure that it wont significantly harm a substantial number of small businesses. Agency rules implement the enforcement of legislation passed by Congress and signed into law by the President.

Problem: New rules can avoid the analysis if the enforcing agency’s head “certifies” (by publishing a statement in the Federal Register) that rule won’t adversely affect small businesses.

For example, the CPSC (Consumer Product Safety Commission) recently entered official comments into the Federal Register regarding several important CPSIA issues.

One of the things in that Federal Register entry is the RFA certification statement that says the CPSIA “doesn’t impact small business”. In that link, see page 10479, section G where they make all things right with the small business world by simply saying small businesses (even those “evil mommybloggers” who own businesses<g>) won’t be affected.

My Kingdom for Safe, Modern Food!

A new challenge for some small businesses might be HR875, which has an easy-to-like name: the “Food Safety Modernization Act“.

Not even Mr. Peanut would try to convince you that we don’t have food safety work to do.

Like the CPSIA, this law appears to target large food processing facilities, corporate farms, imported foods and so on. After all, you don’t hear about thousands being poisoned from foods purchased at the local farmer’s market.

Just like the CPSIA doesn’t differentiate between moms who sew outfits for my granddaughter and big Chinese factories that import a few thousand container loads of mass-market clothes per year, the FSMA (HR875) doesn’t differentiate between Tyson, Conagra and the guy who owns 9 chickens so he can sell eggs once a week at the local farmer’s market.

Not even the USDA-certified organic farmer escapes the FSMA’s reach.

All your chickens are belong to us

No, that is not a typo.

Finally, there is the new animal radio ID labeling regulation currently National Animal Identification System that is winding through Congressional committees.

Yes, I regularly remind you to measure everything, so I can see the good coming from this.

Except…

The problem with the NAIS, as with the CPSIA and the FSMA, is in the cost of implementation when you compare a large corporate farm to someone who organically (or not) maintains even one head of livestock or 9 chickens.

The point of all of this? You need your trade association. If you don’t have one, start one. If yours stinks, get involved and make it better.

No, it won’t be easy, though fixing an org is easier than starting one.

Working as a Wal-Mart greeter is easy. Pushing the Staples Easy button is easy. If you wanted easy, you wouldn’t have started / bought a business.

These laws can just as easily impact your employer as they can you as a self-employed person, so you’re going to be subject to some of them one way or another.

Get involved.

Heard in the slammer: “I used to make handmade toys”

One of these days, my granddaughter would love it if I bought her a little homemade bear like the one in the photo.

Trouble is that after February 9th 2008, it’ll be a violation of Federal law to sell it to me.

Doesn’t matter if it’s sold at a small retailer, a craft fair, a resale shop or in your expensive, high-end, fancy pants, mostly-imported toy store. Bottom line: If you sell or handcraft toys or clothing for kids, it’s entirely possible that you will be out of business as of February 10th 2009.

Read that again. It’s 56 days from today (Dec 15, 2008).

While it would be easy to dismiss this as me overdosing on too much caffeine, I’m sorry to say that isn’t the problem.

CPSIA – A Slam Dunk

Remember Christmas 2007?

Not only were retailers flush with good retail sales, but the news was full of recalls of defective toys from China and elsewhere – in some cases, toys made in the Chinese plants of American toy “manufacturers”. Lead was a prevalent issue.

These problems angered the nation at large and embarrassed Congress. In those circumstances, its just a matter of time before legislation results.

In this case, the result was the Consumer Product Safety Improvement Act (CPSIA). If you’re a craftsperson who makes toys and kids clothing or a retailer who sells these items, the CPSIA is your Patriot Act and you aren’t the good guy.

This law was so well-favored that when you combine the results of the House and Senate votes on the final legislation, it received only THREE “No” votes.

More presidential candidates MISSED the vote than did those who voted against it. 

The Consumer Product Safety Improvement Act (CPSIA), passed on July 31 2008 and signed into law by President Bush on August 14 2008. The Act makes it illegal to manufacture or sell toys, clothing and other items for children that do not meet the act’s testing and labeling requirements. The Consumer Product Safety Commission’s budget has been increased by $620 million so they can enforce this law, whose details were largely left up to the commission.

All it would have taken to help small business owners exemption-wise was to include some common sense testing and labeling exemptions for all natural toys and clothing. That would have left a good piece of legislation in place, without threatening a ton of home-based businesses.

Unfortunately the CPSIA contains nothing like that. Work at home folks don’t have a big lobby in Washington. The handcrafted wooden toy crowd has only the newly founded Handmade Toy Alliance, which at last count had fewer than 100 members. As you might suspect, they aren’t a power player in Beltway circles.

The big boys like Mattel, Wal-Mart and Toys-R-Us are substantially impacted by CPSIA, but quite frankly – if they had been better corporate citizens from the outset, we wouldn’t be having this conversation.

Mostly, this is great news for parents trying to find better products for their kids.

There’s always a “but”

Again, there is nothing in the Act that eliminates or alters the testing and labeling requirements for those that use 100% all natural materials during manufacturing. Perhaps that was considered a loophole that was just too big.

Is petroleum a natural substance? If so, then all plastics must be too, right? And why isn’t lead?

Before you go off the deep end about your cousin who chewed on too much lead paint when he was a kid, I have to say that in general, I am a fan of this legislation. It’s the only way to get large importers and offshore manufacturers to get their act together.

Obviously this law was sorely needed to deal with repeated instances of imported items containing lead, small parts on infant toys, much less the weaknesses in our existing regulations.

Objects in your mirror are larger than they appear

If you think a little harder, the target is much bigger than a bunch of craftspeople selling their wares on Etsy.com (link goes to their open letter to the CPSC re: CPSIA), eBay, craft fairs and small local retail shops.

Anyone who sells this stuff has a new cost of doing business to add to their expense list. Anyone who has these items in inventory has to get rid of that inventory by February 10, 2009 (some can wait till August), or pay to have it tested and labeled per CPSIA requirements.

While the large manufacturer suddenly has a substantial new COGS item, it’s the little guy is the one who is going to suffer the most because they simply can’t afford the testing that is required.

For example, there’s a retired lady here in the Flathead Valley who makes little wooden trains in her garage woodshop. She carefully scans paint manufacturer websites and questions their representatives by phone to be sure there’s no lead or other nasties in the paint she uses on her carefully made toys. Her business is history if the CPSIA stands as written.

I just don’t care…or do I?

You might be thinking that you really don’t care. Maybe you don’t have kids or you only buy toys and clothing from major American manufacturers (er, I mean importers). Or maybe you don’t own a store that caters to kids, so why would you care?

It’s time you started caring, but let me help you decide. Here are a few examples of businesses that will be impacted by the CPSIA, otherwise known as “reasons to care”:

  • If you make wooden trains in your garage and sell them *anywhere*, you get to pay $4000 per toy to a 3rd party testing lab to assure compliance with the CPSIA.
  • If you make sock monkeys at home and sell them at your local craft fairs and tourist shops, you have three choices: sell them in violation of the law, close up shop or pay the fee to have your items tested. Each SKU = $4000, most likely.
  • If you own a small toy store, sell items that cater to kids, or you sell antique toys or anything else that comes to you without CPSIA-compliant labeling, you have to pay to test every item, or make sure that it has been tested. Presumably, testing a small sample of the same lot is acceptable, but “presumably” is not a way to stay legal. I suggest contacting a testing lab and/or attorney for more info.
  • If you import all your toys from Europe, you have to have them all tested, despite the fact that Europe has for years had stricter toy safety standards than the U.S. Again, the same advice as above regarding testing of items in the same lot.
  • If you create or sell science kits for homeschoolers, the CPSIA appears to apply.
  • If you’re a school who buys such kits, your vendors may also be subject to it.
  • Every U.S. toy manufacturer who actually manufactures items here at home – and likely had nothing to do with the toy recalls from 2007 – still has to pay to test their toys. That part makes sense, unless the items in question are made from 100% natural materials.
  • If you enjoy shopping for your kids at craft fairs, online at Etsy.com or eBay, or you like buying used toys and clothing – sales of items that do not conform to CPSIA regulations and that have not been tested will be illegal to sell to you.
  • If you sell items for kids on eBay, all your existing untested or non-compliant inventory has to be sold before February 10 or it cannot be sold without being tested. The phase-in starts with larger concerns, but it’ll get to you before you know it.
  • Retailers can be held liable for selling any handmade toys or children’s items that are not tested by a CPSIA-compliant lab and labeled per the CPSIA.

If you don’t own a business that has anything to do with kids, don’t think it doesn’t impact you. Think about the owners, employees and family members of the businesses described above. They might not be spending money in your store by the time the CPSIA gets done with them.

Do these artisans buy computer paper, coffee, towels, hamburger, gasoline, haircuts, dog grooming, fine wines, appliances, landscaping, envelopes or tires from you?

What will they buy from you if they are put out of business by this law? Are you in line for a bailout?

Suddenly, it’s time to care, eh?

What do I do next?

First, call your Senators and your Congressional Rep. DO NOT email them. DO NOT fax them. Those things are far too easy to ignore.

Call them and hold their feet to the fire.

Next…Research and legwork.

Remember that your existing inventory falls under this law, whether you are a retailer or a manufacturer, regardless of size. Some of the regulations kick in later in the year, so I suggest you read this coverage at Fashion Incubator for additional details. Here’s additional info on what must be tested per the CPSIA.

You have 56 days as of Monday December 15.

The full text of the law is here: HR 4040 or if you prefer a PDF, here. Check out the CPSIA frequently asked questions (FAQ) list at http://www.cpsc.gov/about/cpsia/faq/105faq.html.

Speaker of the House Nancy Pelosi’s website does a nice job of summarizing this well-intentioned, but incomplete bill.

[audio:http://www.rescuemarketing.com/podcast/HeardInTheSlammerHomemadeToys.mp3]

Preparing for business disaster: Replacing You.

You may find it uncomfortable to think about this one, and you might even be lazy when it comes to implementing things related to it, but it’s important to do so.

What steps have you taken to deal with something happening to you, or a key employee?

Insurance companies have “Key man coverage” (and yes, I fully realize it is available for women, surely by now you realize that all of the women in my life are key<g>).

Do your key people have key man coverage?

What have you done to prepare your company for the worst?

Would they know where everything is? Are there instructions to help find it?

If it’s a family-owned business, have you talked with your family and put plans in writing for succession?

Are you cross-training other family members, or other employees?

We’ve talked at length about documenting employee processes, but are YOURS documented?

Is there a checklist of things that must be done weekly, monthly, quarterly? For example, are you the only one who knows what EFTPS is? Certainly anyone can pick that up and do it, but if they don’t know they need to…big problem.

Coming in this discussion: technology, marketing to clients who think your biz is toast, what others have experienced and what you can learn from it.