Even in a recession, savvy retailers can boost their business.

The Flower Lady, Suwanee, Ga.
How does a florist sell more in this economy? We changed our business to designing weddings and events only, as the everyday flowers are not selling. We had to throw out too much product at the end of the week — flowers are perishable!

By Coeli Carr, CNNMoney.com contributing writer
As budgets get tight, people are spending less on luxury items — which means retailers in that market also need to clamp down and mind the bottom line.

Flowers’ short shelf life mandates that you control buying and adhere to a strict formula, says Keith Riewe, owner of Bice’s Florist in Fort Worth, Texas. The industry standard rule is that the wholesale cost of your flowers should be one-third of what you sell them for, he says.

The moment you realize you’ve got product left over, it’s time to cut your orders, says Riewe. Although many florists pay less for flowers by using a standing order, it’s often more cost effective to customize your orders. You’ll pay a little more, but you won’t be throwing unsold flowers away. It’s better to run out than to have unsold product, he says. Some florists have hybrid ordering systems that consist of a smaller standing order, and a separate, supplemental order when necessary.

Another way to cut your expenses is to keep a detailed count of what goes into your bouquets.
“Designers love to overstuff an arrangement to make it look pretty,” says Riewe. “When that happens, you’re giving the customer way more than what they pay for.”

Louie Theofanis, owner of Major Wholesale Florist in New York’s flower district, suggests boosting your margins by filling out bouquets with less expensive but attractive blooms. “Presentation is always important,” he says. “It’s important that customers feel they’re going out of the store with an armful of flowers, and that they’re getting their money’s worth.” Greens have a longer shelf life, he adds.

But no matter how gorgeous your merchandise is, you need to get customers into your store. That’s why advertising and promotions are even more important in a sluggish economy. Riewe recently gave away 500 rose bouquets, featuring a dozen flowers in each. The only thing people had to do to get one was come to his shop and provide contact info. Along with the bouquets, recipients got a card prompting them to visit the shop's Web site. Remarkably, 298 out of the 500 people did so.

That's another way to boost business. “It’s imperative you become technically savvy,” says Riewe, adding that most flower shops, compared to other retailers, are lagging by five or six years. He suggests using point-of-sale software to collect information from those who send and receive your flowers. Using the data he collects, Riewe sends out "preferred customer" cards, which offer an opportunity to earn reward points and be notified by e-mail of special offers.

Riewe suggests that florists rely less on corporate clients and focus on consumers. If one big company’s account represents a large part of your business, your revenues will become too dependent on them. Expanding into weddings and events is a smart move because those orders are typically paid for up front.

Give us your advice: Check out recent “Ask & Answer” questions.

Turning customers into repeat buyers

Advertising vs. PR: What pays off?

Discounts and referrals: What works now

Sales don't just wander in your front door. Here's how to cultivate up a steady stream of shoppers.

Sanjay, Huntington, N.Y.
We have a retail shop of clothing and jewelry. I sit all day waiting for the customers. How can I utilize that time on my computer, and do something that will generate extra cash for my business?

By Dinah Eng, CNNMoney.com contributing writer
If you're not selling your products online, now is the time to start — and if you've already taken the e-commerce dive, you can use your down time to build sales-boosting buzz.

If you don’t already have a Web site for your store, you can ease in by selling on established sites like Amazon.com or eBay. If you have handmade items, try Etsy.com or ArtFire.com.

Whether you're selling on your own site or an outside one, a good next step is to compile an e-mail database of your customers. Realize, though, that technology alone is not going to sell your inventory.

Paul Schneider, owner of Twist

“Retail is all about relationships,” says Paul Schneider, owner of Twist, which started as an artists’ coop and now sells jewelry and art pieces through two stores in Portland and one in Seattle. “If you compile an e-mail database and use it to establish a line of communication, you’re three-quarters of the way to making a sale.”

If you have six customers a day, you could compile 36 names a week. The trick, of course, is getting people to give you their e-mail addresses.

“I try to make it fairly personal,” Schneider says. “'Would you mind if I got in touch with you when we have a special promotion for our e-mail friends only?' Make it a private, exclusive club. Don’t send more than one mass e-mail a month. To a small retail business, this is gold.”

Schneider says he uses his Web site for personalized pitches, sending customers links to pages with items that may interest them.

To attract new customers, he suggests finding the blogs and discussion groups online that deal with what you sell, and becoming a part of the discussion.

“Talk about your products, even if you don’t have your own Web site,” he says. “If you sell wedding rings, get on the bridal blogs. We’re starting to work with social networking, and have a fan page on Facebook now. There are search engine optimization consultants who can help you craft online ads.”

Richard Eiseman, Jr., owner of Eiseman Jewels in Dallas, a high-end boutique, is now in the process of inputting a mailing list compiled over 40-plus years into a database. To entice people to register online, he sent out direct mail pieces offering a free valet parking pass at the mall and a chance to win a $5,000 store gift card.

“Find ways to get exposure by doing something unique," Eiseman suggests. "Host a charity event in your store. Have the local school sell something at your store. You have to get foot traffic in based on some expectation other than buying.”

Utilize that time in between walk-ins by reaching out to customers on the phone.

“Keep a card on every person you’ve sold to,” advises Scott Marshall, a Los Angeles consultant who specializes in retail management and e-commerce. “Write down what they like, their family information, anything you can think of. Then think of how to help them with the products you carry. If you’ve got trendy teen clothing coming in, and their card says they have teenage nieces, call and tell them, but do it in a way that shows you’re interested in them, and not just the sale.”

Marshall says men, in particular, always need help with finding the right gift for women. Have their spouse or girlfriend fill out a store “wish list,” then offer to send the guys an e-mail reminder when a birthday, anniversary, or holiday is coming up — and suggest items that the women in their lives might enjoy.

“You have to decide to be in the game,” he says. “Too many people think 'I’m a small store, my customers don’t have a lot of money.' Everybody wants to find a deal without searching high and low for it. To somebody, your things are expensive, and to somebody else, the items are cheap. If you’re ready to just sit at the computer and do work for someone else, you’ve given up on your own store.”

Give us your advice: Check out recent “Ask & Answer” questions.

Pay for the marketing that works

Even bad reviews boost sales

HR by Twitter

A dry cleaner considers turning customers' absentmindedness into a tidy tax break.

Taylor, Jackson, Miss.

I own a dry cleaning business and was wondering what to do with all the forgotten or left-behind clothes. They date back a few months or as far back as a year. I read that by donating them I could get a tax write-off.

By Kathleen Ryan O'Connor, CNNMoney.com contributing writer

You can donate them, but you might want to review your state's abandoned property laws — and at least one expert we spoke to says you can't take a tax write off.

Here's why: "A business charitable tax deduction has to have a tax basis," says Philip R. Lieb, an accountant in White Plains, N.Y. "The clothes cost the dry cleaner nothing. The cost of cleaning has already been expensed through the dry cleaner's business operation. The business charitable deduction would be nothing."

And, depending on the state, you also can't just dump them off at the local Goodwill and call it a day.

Many states place the disposal of forgotten clothes under abandoned property laws, and the guidelines can be quite specific, says Ann Hargrove, director of special events with the industry trade group the National Cleaners Association.

One New York cleaner ran into legal trouble for trying to sell clothes that had been left for more than six months, Hargrove recalls. In New York, the property cannot be sold, only donated to a charity.

And to give you an idea of the specificity of the law, at least in New York: Cleaners must give notice to customers that abandoned dry cleaning will be donated after six months, and "such notice shall be at a minimum 11 inches in height by 17 inches in length and the printed characters shall be 1.25 inches in height and at least .5 inches in width," the law decrees.

The cleaner must also keep the donation receipt, with the original receipt for the customer's drop-off, for a full three years after the donation.

Mississippi law is a lot less clear.

Kathryn Stewart, a Mississippi Treasury Department spokeswoman, says she can't find anything that places clothes left at a dry cleaner under the state's unclaimed property laws, which cover cash and securities.

Your fellow cleaners in Jackson seem to work under an informal guideline of considering items abandoned anywhere from 30 days to a full year after they're dropped off, says Ebony Beals, a clerk at Clark Cleaners, which has several locations in Jackson.

They wait a year and then donate the items. "We figure you either forgot or didn't want the items, but we do wait a full year," Beals says of her store's approach.

For additional advice on the tax implications of abandoned items, consider consulting your personal accountant.

Give us your advice: Check out recent “Ask & Answer” questions.

Tax tangle: Medical deductions for LLC owners

Starting a biz: What you can write off

My business failed. What can I write off?

Sorry, it's legal, and you may even have to pay more than just the rent.

Richard Barker, Aprizona Florist, Covington, Ga.
Our business went south, and as a result we had to break our lease. Less than 30 days later, the landlord rented the space to a new tenant. Six months after that, we were served with papers demanding $12,000, which is the remaining rent on the lease. Is it legal for the landlord to collect rent from both new and old tenants?

By Adriana Gardella, FORTUNE Small Business senior editor
The answer depends on your lease terms. As you describe it, the situation sounds unfair, but that doesn't make it illegal, says lawyer Hanna Hasl-Kelcher, author of The Business Guide to Legal Literacy: What Every Manager Should Know About the Law.

Generally, a tenant must pay rent until the lease term expires. Moving out early won't end that obligation unless you have a different agreement with the landlord – preferably in writing. Although some agreements may provide that the landlord can find a new lessee before the broken lease expires and use the new tenant's rent to offset the amount owed by the departing tenant, you shouldn't act on this assumption. "This type of provision must typically be negotiated," Hasl-Kelcher says.

Have an attorney review your lease and discuss possible defenses to your landlord's claim. Typically, you'll face a penalty for breaking a lease, says Elizabeth Milito, a lawyer with the Small Business Legal Center, which is operated by the National Federation of Independent Business in Washington, D.C. Even if your landlord reduced his or her damages by the amount of the new tenant's rent, in many states it is the former tenant's responsibility to prove that damages should be limited, she adds. There are other damages you may be obliged to pay, such as your landlord's attorney fees and expenses incurred in finding the new tenant.

Next time review your lease carefully before signing. "Commercial leases typically provide more room for negotiation than residential leases," Milito says. "Don't be afraid to request modifications."

This column provides general information only and is not intended to replace the services or legal advice of an attorney. Always consult a lawyer regarding any specific legal concerns, as laws vary from state to state.

Give us your advice: Check out recent “Ask & Answer” questions.

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When the lease outlives the business

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For retailers that don't want the overhead of stockpiling merchandise, drop shipping can be a cost-saving option.

Mike, Queens, NY
I started a home-based wholesaling business six months ago and got four credit cards totaling $18,000. I was scammed out of $10,000 and invested another $4,000 into a Web site and advertising. Now my cards are almost maxed out, and I need the cash or credit to purchase merchandise. Business people tell me it takes a few years before turning a profit, but I've worked like the devil these past six months to finally get the contacts and deals I've been searching for, only now I don't have the cash or the credit. Is there anything I can do?

By Kathleen Ryan O'Connor, CNNMoney.com contributing writer
Starting a business from scratch takes time and an incredible amount of energy – and setbacks are inevitable. It can feel like you're knocked two steps back for every step forward.

Lacking working capital is going to make it even harder, unfortunately. Credit markets have grown extremely tight, and the fact that you're using nearly all of your available credit lines pushes down your credit score, which makes you a less attractive candidate to the banks for extending further credit. That's never ideal, but it can be the kiss of death today, when even people with pristine FICO scores and very little debt are finding it difficult to find decent lending options.

So what to do?

One option is to take a break from working on your business full-time and find an outside job that will let you pay down debt.

But if you want to keep forging ahead, you could approach the suppliers you've already lined up and ask if they will open an account for you to buy on their credit terms. That may be tricky: When you run a credit check, you might not rate as a good risk.

Another option is for you to start an account with a drop shipper. Drop shopping is a "buy-as-you-go" model under which you advertise the merchandise, sell it to the customer, and then, after the buyer's money arrives, you complete your purchase of the requested products from the drop shipper, typically via credit card. The shipper then mails the purchased items to the customer on your behalf. The transaction is generally invisible to buyers: Drop shoppers offer a variety of arrangements, from plain boxes to packaging decked out with your logos.

Drop shipping isn't a new concept. One of the few studies on the practice, published in the journal Management Science in 2006, found that about one-third of Internet retailers rely on drop shipping to fulfill orders.

"Early on, there was a lot of hype around drop shipping," says Serguei Netessine, an author of that study and an associate professor of operations and information management at the University of Pennsylvania's Wharton School of Business.

The initial idea was that drop shipping would be a one-size-fits-all "panacea" for e-tailing. That hasn't panned out. In its early days, even Amazon.com (AMZN) used drop shipping, but the bookselling Goliath soon realized the practice wasn't a good fit for the volume of business it was doing. Amazon instead committed to buying its own inventory and building warehouses. It now offers its own drop-ship service to smaller retailers, Netessine says.

"That's kind of a natural evolution," he says.

Among the downsides of drop shipping: You are introducing a middleman into the transaction, the drop shipper, who has to make their own profit, so your margin is going to be smaller than if you acted as the wholesaler yourself. On some products, the profit margin is already so low that drop shipping makes it extremely difficult to make any money at all.

Another challenge: Drop shipping scams are all over the Internet. Key red flags include recurring monthly fees or difficulty in getting a live person on the phone. Try to hit a trade show. If a drop shipper has a booth there, that's probably a good sign. Several Web sites help connect online merchants with drop shippers and wholesalers; WorldWideBrands.com is one example.

And since your shipper will be packaging and shipping merchandise under your name, be certain to pick one that demonstrates a commitment to the same quality and customer service you'd want your customers to expect of you.

Also take care to thoroughly note your shipper's policies on backorders, returns and lost shipments. Chronic problems in order fulfillment have destroyed many a small business, online or not, and savvy consumers used to Amazon or Zappos boxes dropping on their doorstep a day after they've clicked in their order will not look kindly on poor or slow service.

Give us your advice: Check out recent “Ask & Answer” questions.

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Business grants: Sorting out the scams

Raising cash for a fast-growing business

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A good distributor can make or break your product line. Here's how to find the right one.

Deziree Williams, Sugar Free Baby, Los Angeles
I have a children's eco-friendly clothing line. We are taking it slow because we are branding our line and are in some ways picky about who we sell to. I have recently been approached by a distributor, but I'm not sure if this is the best way to launch into the market. Any advice?

By Emily Maltby, CNNMoney.com writer

By the look of your Web site, SugarFreeBaby.com, it seems you are off to a great start. You've evidently taken the right steps to approach the smaller retailers already, as your line is already in a number of stores.

You are wise to be conservative about which storefronts represent your line. But as you expand, part of your decision about working with a distributor will depend on whether you want to stick to the small stores or get to the national chains. You can continue to go it alone if you stick to the smaller outlets, but a distributor is essential if you want to reach out to the big guys.

"Large retailers want to see someone in the buyer's office that they already has a relationship with – someone who knows the system," says Gordon Cundell, a former assistant buyer with Sears Canada and current president of the Canadian Sporting Goods Association, an information service for sports equipment and apparel buyers and sellers.

Working with a distributor could be a smart move even if you want to indie shops. "Suppliers often have the passion needed for a successful product, but no business sense to get the product in to the right places," Cundell says. "Chances are the average clothing designer doesn't even know all the distribution channels that are available."

And of course, even if you have the knowledge to do the job, you may be stretching yourself too thin by taking on the daily activities of a distributor.

"One benefit of using a distributor is that ideally you have one place to ship your goods to. They break it out and do all the individual shipping and selling for you," says Rob Reger, president of Cosmic Debris and creator of the gothic Emily the Strange product line, which is sold internationally, in 200 independent boutique stores, and in large chains such as Hot Topic and Borders. "This leaves you with designing and manufacturing, keeping the quality control in your hands."

If you decide to work with a distributor, picking the right one is critical. What should you be looking for?

Both Reger and Cundell say your distributor's vision is crucial to a successful relationship. You need a partner who fully understands what type of customer you're targeting, and who has ties to retailers that serve your market.

"Taking it slow and building your brand with a specific core customer in mind is wise," Reger advises.

"Find out what they already distribute," Cundell says. The other lines they represent should be similar but not exactly the same as yours.

You'll want to find children's clothing distributors who don't currently have green attire in their lineup – if the distributor already has eco-friendly offerings, "you risk the lines competing with each other," Cundell says.

Give us your advice: Check out recent “Ask & Answer” questions.

Related links:

How fashion designers break in

Get your clothing line into gift shops

We asked the experts and created a step-by-step guide to getting noticed on the fashion scenes.

Samantha Risto, Risto Designs, New York, NY
I recently launched a small women’s clothing business in New York out of my apartment. I would like to know how I can sell to small retailers and boutiques. Do I just show up at their store with samples in hand or is there an "established" way of doing this?

By Emily Maltby and Shara Rutberg, CNNMoney.com
The answers are yes and yes: You can show up at a store, but there is an established way of doing so.

"A scattershot approach won’t work," says Ira Davidson, director of Pace University’s Small Business Development Center and a former buyer for Abraham & Strauss, a famed New York City store that later became part of the Macy’s chain. "You have to have some discipline."

The best way to establish yourself is to start small. Boutique retailers should be your training wheels for the department stores.

"The boutiques will help you learn the process of how to run a business and show you how quickly you can manufacture the goods, and how to structure the orders," says Bliss Lau, an accessories designer who now has her line in more than 40 stores worldwide, including department stores in Japan. "The smaller retailers will be more flexible. If you manage to get into a large department store off the bat and the goods miss the deadline, you'll lose the order."

So how do you get your foot in the door at a small boutique? First, carefully identify your target stores. Then, reach out to them by visiting or making appointments. To increase your chances, find out what time the owner or the buyer is in the store, make a business card, and wear your line when you drop by, Lau suggests.

This method takes a thick skin, so you can't be afraid of rejection. Lau once took a train from New York to Washington, D.C., getting off at each stop to pop into stores. "I got flat-out rejected by half of them and had a great time at only one of them. But the way I saw it, I scored a new client, which was great," she recalls.

Many retailers don't think the drop-ins are effective.

"It happens frequently in my store, but it's usually not a good time to engage in conversation because the customers have to come first," says Candice Waldron, owner of boutique store Jumelle in Brooklyn. "Making an appointment for before-store hours is better."

Yvonne Yip, head buyer at Big Drop, also in New York City, thinks that the most effective way to get exposure is to mail in a Look Book. "About 10 pieces, photographed from different angles and put together in a professional way, will speak for itself," she says. "Also make sure the book includes a line sheet describing the items and listing the prices of each."

Your sample line is critical, says Linda Carter, president of The Retail Management Advisors, a Dallas-based retail consulting firm.

"Do not go with 50 samples," Davidson says. Six to 12 of your best styles is enough. And don’t forget to bring a color swatch book, showing off small squares of the fabrics for your line.

But buyers don't simply wait for designers to come to them. Yip finds most of Big Drop's products in fashion showrooms.

"Sales reps at the showrooms have connections to us. They know how to best present the lines and they know how business is done," she says. "Nine times out of 10, it's easier for us to work with a rep than with the designer." Most showrooms will have multiple lines, so when Yip goes to see one line that has piqued her interest, she often gets to see four or five others as well that she wasn't expecting.

Showrooms charge designers for the space, and often for commission as well. Before you sign on with one, research the reputation of the showroom. Notice what other lines it showcases – if the showroom carries denim and you also have a denim line, they may compete with each other. Pick a showroom that has lines that will complement yours.

And be wary if the turnover is quick. "If the showroom features the same designer for a few years, it speaks very highly of the relationship," Yip says.

In addition to a sending out a book and displaying your work in a showroom, you should hop online and see what trade shows cater to your type of customer, Carter says. There are many run all throughout the year, especially in New York City. "It can be costly right off the bat to rent space, but may be less expensive in the long run as far as letting people know who you are and what you offer," she says.

"When I first started my company five years ago, I went to every trade show and conference I could find and would chase down all the big name sales reps," Lau says. "I'd show them any piece of press that was written about me and ask them for suggestions about my line."

If you do pursue trade shows, don't forget to focus on also getting your designs into local stores. "Big stores send buyers to trade shows, but then they continue their research at the boutique shops," says Jumelle's Waldron. "Buyers from Anthropologie and Harvey Nichols come to my store because they know the smaller stores are more willing to take risks with the designers."

If you're looking to break into the big leagues, make sure you have your manufacturing operations in order and are ready to expand your business to handle the demands of department stores.

"You have only one chance with the big players," Yip says. "You can't go from zero to 500 units, so put your designs in the boutiques to work out the kinks."

For more advice, Bliss Lau recommends The Fashion Designer Survival Guide by Mary Gehlhar.

"From having a fashion show to a company to pitch, it is a wonderful book for the creative mind," Lau says.

Give us your advice: Check out recent “Ask & Answer” questions.

Related links:

Get your clothing line into gift shops

Startup skills for a t-shirt company

Working around the vendor fee

How to avoid Website trademark disputes, and where to turn when you run in to one.

Phil Schmidt, President, Capital Medical, Sacramento
I created a Web site in 2004 to help me sell medical equipment for a third-party manufacturer. Two years later a competitor trademarked [sic] my domain name. Recently the competitor threatened to sue me unless I shut down my Web site. They claim they have used my domain name since the 1990s to help them sell their product. They offered to pay me a nominal amount for the URL. Do I have to stop using my URL?

By Adriana Gardella, Fortune Small Business senior editor
Your situation presents a cautionary tale. The lesson? "Check the publicly accessible USPTO online database for registered trademarks, or consult a trademark attorney before adopting and using a domain name that may infringe on another's trademark rights," says Gayle Strong, an intellectual-property lawyer with the Denver office of Greenberg Traurig. Since it is already too late for that, we urge you to do the next best thing: Talk to a lawyer. To find one, you might start with the Sacramento County Bar Association, which has a referral service. Only a professional with a full understanding of the facts of your case can help you choose the best course of action.

That said, we can offer some insight into the possible issues raised by your question. Using the right language is a start. Your competitor did not "trademark" your domain name. Rather, it registered the trademark.

"The fact that your competitor did not register its trademark until after you registered your domain name is not controlling if the competitor was using its trademark nationally before you registered your domain name," says David Kelly, a partner with Finnegan Henderson Farabow Garrett & Dunner in Washington, D.C. He notes that merely registering a domain name will not give you the right to use it. "Your ability to use a domain name is subject to the prior trademark rights of others."

"The first user of a mark will typically be protected," explains David Burgert, chair of the IP group at Porter & Hedges in Houston. "As with most trademark issues, the key question is likelihood of confusion. In your case, it sounds like both parties make the same or similar products and use the same or similar trade name to market it. So consumer confusion between the two companies seems likely." Burgert says the question will probably become: Which one of you first used the name for the product?

This column provides general information only and is not intended to replace the services or legal advice of an attorney. Always consult a lawyer regarding any specific legal concerns, as laws vary from state to state.

If you want to reach a national audience through the home-shopping networks, you'll need mass-manufacturing capabilities and a catchy storyline.

Mona Kahn, Salt Lake City
I am a jewelry designer and I want to present my merchandise to a larger audience. How do I get my products on ShopNBC, QVC or similar outlets?

By Christina Crapanzano, CNNMoney.com contributing writer
The application process is quick and painless. Both ShopNBC and QVC have applications available online for downloading, and both sites offer guidelines for product submissions. You'll need to send in digital photos of your product and answer questions about your manufacturing process and price point. The networks are looking for vendors who already have a product – they aren't interested in ideas, sketches or prototypes.

We asked the shows' vendor scouts to tell us a bit more about how they pick new products to feature.

QVC has more than 10,000 applicants each year, and also recruits vendors from trade shows or craft fairs. From that, only about 500 new vendors are introduced on-air each year.

"Don't be redundant," says Marilyn Montross, QVC's director of vendor relations. "The first thing we look at is the product. For jewelry, we're asking, 'is this something new and innovative versus products we're already selling?'"

The same philosophy holds true at ShopNBC. "The product is the star of the show," says Anthony Giombetti of ShopNBC's media relations department.

Watch the networks you are applying to and get to know their current products and vendors. That will also give you an idea of their target audience and your potential customers. For ShopNBC, the typical viewer is over the age of 45 and is affluent, with an average household income of more than $70,000. QVC says its customers are predominantly women, though its demographic changes hour-to-hour depending on programming.

Knowing your audience's tastes is only the first part of the battle. The next step for applicants is demonstrating a capability to produce in mass quantities.

"They have to have their ducks in order," says ShopNBC Chief Merchant Kris Kulesza. "If you can only make five to 10 units of something, that could close the door." ShopNBC, which broadcasts to more than 70 million homes, might ask vendors to have as many as 5,000 units available.

However, QVC's Montross warns against jumping the gun – never manufacture large quantities of your product on spec before getting approval from the network. They want to see that you are capable of manufacturing mass quantities, not that you've already done it.

The volume demand usually rules out hand-crafted items.

"In order to do both the volume and quality, [vendors] need to be working with a pretty sophisticated manufacturing factory," Montross says. In rare cases, networks might put vendors in touch with manufacturing companies, but they will not pay manufacturing costs.

"[Merchants] have to be willing to make an investment," Kulesza says. "Not everything will take off or sell out from the get-go. You may have to make an investment up front."

Something else the networks seek: A personality and a story to go along with the product. If you become a vendor, you will likely present your product yourself. You should be prepared with all the elements that go into making compelling TV, such as a good storyline with twists and turns. You'll want to have themes and variations in your product line that you can discuss.

Finally, don't be shy. Be able to talk enthusiastically about your product, both to the vendor scouts and also, potentially, on air.

Persistence is key: Kulesza says that if you submit an application and get no word back, "Don't be afraid to make the call directly to us."

If your business drop ships, be prepared to investigate state statutes for every location in which your suppliers do business.

Chris Crocker, Smyrna, Ga.
Our business drop ships from its various suppliers. We are having more and more vendors tell use we need sales-tax numbers to be exempt from being charged sales tax when shipping to various states outside our state of residence. But it was my understanding that the federal government struck down this requirement from the states: In the Supreme Court case Quill v. North Dakota, the court upheld Quill's position that they did not have to collect sales tax for orders shipped out of their state. My suppliers are saying that ruling did not cover drop ship deliveries. But they’re not selling the product to our customers, we are. So how would they be responsible for paying sales tax outside their state? They didn’t sell it, we did. We have no "presence" in any state but our own. Could you please help me with this issue?

By Lenora Chu, Fortune Small Business contributor
The sales tax experts say that your suppliers are right. The Supreme Court case of Quill v. North Dakota does not apply to drop shipments.

As you know, there are three parties involved in a drop-shipment transaction: The wholesaler, the retailer and the consumer. After the consumer submits the order to the retailer, the retailer submits the order to the wholesaler, who then ships directly to the consumer.

The location of each party will determine whether there’s a sales tax obligation, says tax attorney Brent Herrin of the Atlanta-based law firm Cohen Pollock Merlin and Small.

In most wholesale transactions, you, as the retailer, are exempt from paying sales tax thanks to a resale exemption, Herrin says. In general, you must produce a copy of a resale certificate issued by the state department of revenue to qualify for the exemption.

However, in wholesale transactions that cross state lines, some states do not recognize other states' resale certificates as valid. In such cases, sales tax would be imposed. Furthermore, in some states, the sales-tax statutes deem the wholesaler to be the retailer – thus imposing tax obligations on the wholesaler.

Either way, your suppliers would be right to ask for your sales-tax number, says Joseph Micallef, founder of the Sacramento-based tax consulting firm Associated Sales Tax Consultants.

That information is required because most states impose the sales-tax obligation until proof of exemption is established. Your suppliers would need the sales tax-number to provide the necessary documentation, Micallef says.

As you pointed out, the Supreme Court case Quill v. North Dakota denied the state’s attempt to impose tax liabilities on products shipped into the state, since Quill had no “nexus” or presence within North Dakota. That case dealt with a transaction between an out-of-state retailer and an in-state consumer.

The issue in Quill is different from those faced in a drop shipment transaction, according to both Herrin and Micallef.

The question of sales tax obligations in a drop shipment has to do with whether the state in question recognizes your resale certificate, or whether the wholesaler is defined as the retailer by that state's statute, Herrin says.

In short, it varies from state to state. Examine the sales-tax requirements for the states in which each of your suppliers is located to determine your obligations.

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Getting your products on the market is a first step, but getting them in front of the right potential buyers is essential.

Callixte Matala, Mac-uisine, Montreal
A year ago, I started a high-end, stainless-steel kitchen sink distribution company in Montreal. I've recently added bathroom sinks and bathtubs to the line. The sinks are very high end, made of marble and granite, ranging from $600 to $2,500. Cabinet makers and kitchen designers spotlight them, but I'm still having a hard time selling my sinks. I'm trying to target those who are remodeling their kitchens. What should I do?

By Emily Maltby, Fortune Small Business staff writer
Dear Callixte: You are going in the right direction by working with resellers rather than going it alone.

If you have a retail location, you can set up events to expose yourself to builders and home associations. "You could buy some wine and cheese and host meetings or networking ," says Randye Spina, chief solutions officer of Affordable Marketing Solutions in Bridgeport, Conn. If you don't have your own store, work with the retailers who display your goods – you can probably arrange to run networking events in their stores to show off your sinks.

Spina recommends joining an association called the Society Of Certified Kitchen Designers in order to get to know architects and designers who could use your wares. And because it's so important to network with those in the industry, you should seek out trade shows. The granddaddy of trade shows is the International Home & Housewares Show in Chicago, which will be held in March 2009, but smaller kitchen expos take place in other locations throughout the year.

"Even if you don't have enough money to set up a table at these places, go as an attendee and walk the floors to make appointments with designers and hand out brochures," Spinya suggests.

Giving sinks away can help get your name out there. Spinya recommends contacting HGTV shows that focus on remodeling to see if you can contribute a product to one of their episodes. The host of the show can talk about why your sink works in the remodeled kitchen, and your company may be listed in the credits of the show.

If you are working on a shoestring budget, try to work also with the manufacturers to help you sell their product. "It behooves them to give you money to sell the product," Spinya says. "Ask the manufacturers for collateral materials to produce marketing materials. Tell them you need their assistance to produce banners, postcards and brochures and they should chip in. Take that a step further and split the cost of a radio ad."

Also, a Web presence is essential. "A Web site is the equivalent of a business card," Spinya says. "Even if it's just a beautiful home page with your contact information, it's essential." If you don't have your own retail store, a Web site is a good way to show off your sinks and direct potential buyers to shops carrying them.

In the meantime, since you don't have a Web presence, try to get your phone number listed in online directories. Gregg Stewart, senior vice-president of TMP Directional Marketing, a search engine marketing agency in New York City, says when there is a lot of money on the line, the buyer will want to see the product and have contact with a human before making a purchase.

"In your industry, 85% of purchases are made within 15 miles of the home. People want local solutions because the product is high-end and may have installation issues," Stewart says. "E-business is good for CDs and books, but for expensive home improvement, the consumer wants to see it before investing money."

If your business is in a target zone, don't miss out on the benefits.

Ros Borden, Miami
My wife and I own a convenience store in a federally designated enterprise zone. We have eight employees and we have owned the store for two years. We are struggling to stay afloat and to hold onto our employees. Can you get us information on how to use this designation to benefit us and our employees? I have already cashed out my retirement money. If we can’t get help, we’ll have to put eight people out on the street.

By Kathleen Ryan O’Connor, Fortune Small Business contributor
Dear Ros: Enterprise zones can offer a powerful array of incentives and tax benefits, but even the best leg up can’t save every business, especially in an economic downturn.

That said, there’s still plenty you can do.

Nearly all of the experts we spoke to say small business owners in an enterprise zone rarely take advantage of all the benefits available to them. That’s not too surprising given the complexity that accompanies some zone designations, which came out of a push in the 1980s to encourage economic activity in depressed areas. In addition to federal benefits, nearly every state has its own enterprise zone programs.

Typically, the programs will feature a mix of state and federal tax reductions, employee-based hiring credits, low-cost loan programs and, sometimes, subsidized marketing opportunities. Earlier this fall, small business owners in San Pedro, Calif. even used their enterprise zone designation as an argument to fight a steep hike in parking meter fees.

In your area, Miami-Dade County, benefits can include a 50% reduction in the sales tax on electricity for up to five years; a job tax credit of between 20% and 30% of wages paid for new jobs for enterprise-zone residents; a 97% reduction of sales tax on business equipment and building materials up to $10,000; a corporate tax credit of 20%; a credit of 96% on ad valorem taxes (a tax based on the value of real estate or personal property) not abated by local governments, and more. The benefits even include a 50% credit on contributions to local community groups.

If you haven’t already, call the Miami-Dade County office of Economic Development. They can refer you to helpful resources. Also, the Small Business Administration offers free small business counseling at its SCORE centers. There’s one right in Miami at 100 S. Biscayne Blvd.

At the same time, experts urge you to talk to an accountant who specializes in enterprise-zone tax benefits. Not every accountant is well-versed in current state and federal enterprise-zone benefits and boundaries, which can change over time. This is no time for Uncle Manny to do your taxes.

In 2003, for example, a year California gave away $300 million in tax credits, less than 10% of potentially eligible businesses actually claimed them, says C & I Tax Consultants, an accounting firm that specializes in tax credits.

“There’s absolutely no reason not to look into this,” says Steve Dotan, president and CEO of the Los Angeles company.

And just because you missed the boat on past credits doesn’t mean that the benefit is gone forever. Most states will allow you to go back several years on returns and amend the information, something Dotan says will often uncover plenty of unused credits that are still available.

“I get a lot of, ‘Wow, really?’”

Plus, some credits are refundable, he says, meaning that if you are struggling and not paying taxes, you can actually get cash back.

Louis Andrianos is a powerful example of how an owner can transform a once-struggling business with enterprise zone incentives and a lot of sweat equity.

He and his father took over a shuttered, failed restaurant in the Roselle, N.J., Urban Enterprise Zone more than 20 years ago. With the help from the zone’s benefits, they expanded the business through the years from a modest but successful diner to a full-service restaurant, banquet and lounge facility.

A lot of things had to come together to make it work, says Andrianos, who runs the business with his father, George Andrianos, and brother-in-law Angelo Vayas, but the UEZ credits were critical, including the ability to make large capital investments tax-free.

Co-op marketing opportunities were particularly helpful, Andrianos says. Ask around to see if any are being offered near you. By bundling advertising for the Roselle UEZ businesses together, they were able to reach a far wider pool of customers.

“Like anything, there is no magic,” he says. “You really have to put your time in and make your contacts.”

Roselle UEZ director Harry Wyatt offers this advice for any enterprise zone business that may be struggling:

— Know where your business is coming from. Who is doing the buying and what are they buying from you? Many business owners are guilty of stocking their store with items they may use and enjoy themselves, but will their customers like them? Just as you keep meticulous records of who owes money to your business and who your business owes money to, you should keep a close watch on which items you’re selling and which items you’re not. Moving merchandise isn’t guesswork; it’s a science.

— Advertise to your target customer base. Word-of-mouth can be very powerful, but it’s not very consistent. New businesses that come in and decide they’re not going to do any advertising are really taking a shot in the dark. They don’t know who they want to market to and they don’t know how to reach them.

— Take advantage of networking opportunities. Being part of a UEZ is a license to network shamelessly with other business owners. Roselle has a monthly luncheon for business owners to meet with each other. This often results in new partnerships between local businesses, allowing both parties to save money. Tie your business into the community it serves and you will be rewarded.

Susan Kelley, Kellsson Linens Inc., Denver
Currently I have a traditional health insurance plan for my business partner and myself. However, I hardly use my insurance, while my partner uses all of his and more. I would like to change from this tradtional health insurance into either a Health Savings Account or Health Reimbursement Account, but find it difficult to get information in regards to how these plans operate, and which would be most beneficial to the company and/or to each of us personally. Can you breakdown these 2 plans, with the pros and cons of each plan, so I can make a more informed decision before our current insurance renewal date?

What do you recommend? Leave a comment below with your answer.

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Austin Wiggleton, Mark's Office Furniture, Virginia Beach, Va.
My father has been operating a small furniture company for the past 20 years as a sole proprietorship, and I have been begging him to form an LLC. My question is, if he owes a small amount of back taxes, do the balances have to be paid in full in order to form an LLC or does the balance transfer?

What do you recommend? Leave a comment below with your answer.

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Jay Bhatt, Vikram Sports, Laguna Hills, Calif.
I want to sell baseball bats and table tennis rackets to big retail chains. My company is a 100% minority owned business. What is the best way to proceed? What gross margin do these stores expect to make? How should be my pricing structure be (discounts, co-op, etc)?

What do you recommend? Leave a comment below with your answer.

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Trade shows and industry magazines are fertile sources of contact information for distributors specializing in your field.

Phyllis Erickson, Baltimore
What are the best resources for finding a distributor that specializes in a particular retail area – i.e. sports apparel, running apparel or biking apparel?

By Myrlande Davermann, Fortune Small Business contributor
Dear Phyllis: “Since distributors primarily operate in business-to-business circles, the best way to find and meet distributors is through trade channels,” says Andy Tompkins, health and fitness business group show director for Action Sports Retailer, which operates an annual sports-industry trade show.

ASR's annual show draws distributors from 40 countries looking for new products to add to their lineups. If you want to know what kinds of distributors will be attending a given show, get in touch with the show's organizers: they'll often be happy to share contact information, Tompkins says.

Gary Vasconi, president and cofounder of cycling apparel distributor Upland Sports Group, Inc., says that he and his partner started out by going to trade shows to get a feel for the industry. It took Vasconi nine months to development the business plan for his company; attending trade shows along the way was helpful because he could meet with vendors and discuss his evolving plans.

One worthwhile show Vasconi recommends is Interbike, usually is held in September. This year, it will take place in Las Vegas, Sept. 24-26. Another major draw for the industry is the Outdoor Retailer Trade Show, which is held in Salt Lake City twice a year, once in the winter and once in summer. There, all types of athletic apparel and equipment companies are represented, Vasconi says.

If your budget doesn't stretch far enough to cover travel and attendance fees for shows, check out recent issues of trade magazines for your industry, Tompkins recommends. They typically include both ads and editorial mentions of distributors.

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Hit by the slow-down? Gotta get out? What to do when you can't pay.

Gopal, Broomfield, Colo.
Business hasn’t been good recently at my dollar store, due to the shaky economy and high fuel prices. I’m not making enough to even pay the rent this month. If I close, I will have nearly three years still left on my 5-year lease. If I do out of business, must I still pay rent – it’s roughly $5,000 per month – for the remainder of the lease? How can I get out of my lease without running afoul of the law?

By Kathleen Ryan O’Connor, Fortune Small Business contributor
Dear Gopal: First, don't worry about getting in trouble with the law in the criminal sense – defaulting on or walking away from a commercial lease would be a civil matter. However, you could still face some stiff penalties, so before doing anything, grab your lease and a magnifying glass and start reading the fine print.

In a perfect world, you would have negotiated a sublet or assignment clause into your lease before signing it. This would allow another tenant to come in and take over the remainder of your lease, or some portion of the space. That would not necessarily mean you weren’t still legally obligated, but you wouldn’t be on the hook for the full $5,000 every month, which is the goal here.

But even if you don't have that clause in your lease, don’t be shy about asking for permission to sublet after the fact. Truth is, the landlord knows you can just move out in the dead of night anyway. Plus, in most states he or she is required to mitigate damages by at least trying to find someone to take your place to reduce the payment load you have.

Another option that might already be in your lease is an early termination clause. That would allow you, with far fewer penalties (say one year's rent, or some other lump sum) to get out of the remaining years of the lease free and clear, says Peter Sarasek, partner and head of the national real estate group for the Chicago office of Quarles & Brady.

If none of the above works, there are other options, but all carry the possibility of litigation, Sarasek says.

"Stop paying rent and move out,” Sarasek says. “People do that.”

If you are lucky, it might be a nice location and easy to re-rent. Say the remaining rent under your lease is $1,000 per month and the new landlord rents for $1,500 per month and incurs $400 in new costs; his net is $1,100, or $100 more than he had from you, Sarasek says, so “he really hasn’t suffered any damages.” If that’s not the case, though, and there is a shortfall or he can’t re-rent the space you had, you may have to go to court.

If you are in a strip mall and the landlord has other tenants, Sarasek suggests talking to them as well, since they may be looking for more or different space.

You can fight back, too. If the landlord isn’t maintaining the center – say huge potholes, missing lights – then you may actually have a justifiable cause for not paying rent. It’s called "untenantability," Sarasek says, meaning you can’t use the space as it was intended.

What about going bankrupt?

The last way out is to file for bankruptcy. "I'm not encouraging it," Sarasek says, “but sometimes it's the final thing to do." Filing bankruptcy will essentially terminate your lease, and the landlord will have to get in line with all your other creditors.

Get a lawyer to help you out. A local sole proprietor will be your most affordable bet, says Tom Sestanovich, a commercial real estate expert and partner at Moldo Davidson Fraioli Seror & Sestanovich in Los Angeles.

Whatever you decide to do, make absolutely sure your next commercial lease, if there is one, provides for the possibility things may go south.

Sestanovich  recommends considering these questions before you sign: What is your exposure if things go wrong? What surrender provisions can be worked out? Can you get broad sublet and assignment rights? "It all starts before the lease is signed," he says.

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Emile Dauphinais, Charlotte, N.C.
I’m looking to sell my business. What portion of the sale price is counted as capital gains? How long does one have from the sale of a business to use the profits before capital-gains taxation come into play? Will purchasing another business with the profits offset the gains? And does the new business have to be of the same type? I am now in retail, but might want to consider real estate.

By Lenora Chu, Fortune Small Business contributor
Dear Emile: What’s counted as capital gains depends on whether you’re selling stock or assets. Likewise, how your gains are treated depends on whether you’re selling stock or assets of the business.

Proceeds from the sale of stock is treated as a capital gain, says Rob Nowak, senior tax manager of the national accounting and consulting firm Clifton Gunderson.

The capital-gains rate would be determined by the length of time you held onto the stock and what ordinary tax bracket you fall into, says Richard Beauchemin, owner of Charlotte, N.C.-based Carolina Accounting and Tax Service. He points out that the sale of assets will be treated differently depending on the classification of assets sold. These classifications include capital assets, depreciable property, real property and inventory.

Some assets would be taxed at the ordinary rate, some at the capital gains rate, and others at the recapture rate of 25% for certain real-estate holdings, says Beauchemin. Gains or losses on the sale of inventory, for example, are treated as ordinary income and taxed accordingly.

How the assets are held will also determine how you are taxed. For example, asset sales by C-corporations are taxed at corporate tax rates regardless of the holding period or the type of assets sold, Nowak says . These rates start at 15% and step up to as high as 38% depending on the income level for the corporation, Beauchemin adds.

Asset sales by S-corporations generally result in long-term capital gains taxed at the 15% rate (or 25% for certain real estate interests). However, ordinary gains taxed at individual rates can also result, Nowak says.

The timeframe for taxation

As for timeframe, capital gains taxes are realized immediately, says Beauchemin. They are never deferred. Purchasing another business may offset some of the gain through accelerated depreciation, or through expense write-offs on new equipment purchases, says Beauchemin. However, the gain would not be offset dollar for dollar. You have 180 days to reinvest the sale proceeds in a qualified replacement property, adds Nowak.

The business does not have to be the same type. However, the type of assets you purchase would determine the amount of gain you could shelter, Beauchemin says.

All the experts say you should consult your tax advisor for specifics.

Disclaimer: This column provides general information only and is not intended to replace the services or legal advice of an attorney or CPA. Always consult a lawyer or accountant regarding specific legal or financial issues.

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Angel Burnett, Centennial, Colo.
I am launching a greeting card line. What are your suggestions on getting into major retail stores?

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The government can help you get cash with the SBA's 7(a) program, but banks still hold the purse strings.

Chris Holm, LUK Industries, Chandler, Ariz.
I run an Internet retail store that has been in business for just over a year. The business is running in the black, so I want to move some of our start-up costs to a fixed-rate loan. Is an SBA 7(a) loan the right choice for us?

By Kathleen Ryan O’Connor
Dear Chris: Congratulations on making it through your first year of a new venture with a profit. That’s no easy feat.

Leveraging that success to consolidate some of your expenses may indeed be a smart move. But before you start filling out the mountain of paperwork required to obtain a 7(a) loan from the Small Business Administration, you need to figure out how big a risk you and your business pose to a traditional bank.

Contrary to popular belief, Uncle Sam doesn’t lend money directly under the 7(a) program – you must still apply through a commercial lender. But the government does guarantee 7(a) loans in order to mitigate risks that might prevent a bank from lending you the money directly, says Ron Goldstein, assistant director for economic development in the SBA's New York office.

Those risks could include the type of business you're in, the number of years you've been operating, a shortage of collateral, high debt-to-net worth, or concerns about your ability to service debt, he says.

Assuming that an SBA-backed loan makes sense for your business, you need to figure out exactly what you want to do with the money so that you spend it wisely, says Germain Boer, a professor of management and entrepreneurship at Vanderbilt University's Owen Graduate School of Management.

A clear plan will also help you get the loan. “That makes the bank feel more comfortable with you,” says Boer.

But small business owners shouldn’t look to the SBA program as some sort of freebie: “This is not any kind of a gift,” Boer says.

At the very least you’ll need to provide financial statements that demonstrate past performance, along with a detailed cash budget for the next two years.

Given the current credit crunch and economic uncertainty, the bank will probably require you to secure the loan with solid assets.

Ask yourself one crucial question before signing on the dotted line, Boer says: “Can I really risk losing that?”

Need more information? Free advice from the SBA is plentiful in your area. The agency’s SCORE program – the acronym stands for Service Corps of Retired Executives, all SBA volunteers - has two nearby chapters, the East Valley SCORE in Mesa and the Phoenix SCORE.

If your financial needs are relatively modest, you might look at the SBA’s Microloan Program, which is targeted to “start-up, newly established, or growing small business concerns,” according the SBA Web site. You could be eligible to borrow up to $35,000, with an average loan of $13,000.

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