Esta Semana en Small Business de Bloomberg BusinessWeek...

This week in Small Business

The U.S. Postal Service has 31,272 post offices across the country. Only about 6,000 generate enough business to cover costs. Get the latest on the nationwide push to help the imperiled federal agency save money while giving local entrepreneurs a boost.   Also on tap: Learn about services gaining traction by getting small suppliers paid more quickly by large clients. Weigh in on the SBA’s role as a home lender, the ongoing scuffle over the online sales tax bill, and crowdfunding sites becoming creative as they await SEC rules. Finally, meet a Storage Wars star who sued A&E for "committing a fraud on its viewing audience." Enjoy.     I’d like to hire someone else and be open a few more hours. This could be key.” —Heather Gable Small Business The Post Office Returns to the Local Store By Devin Leonard   May 23, 2013   Heather Gable has had it rough. During the recession, sales dropped off at Finger Lakes Coffee House, the business she owns in Van Etten, a small Upstate New York town. She had to lay off most of her employees. At least there’s one recent development to keep her optimistic: In March she opened a post office inside her store. She hopes she’ll be able to sell lattes and bagels to customers who come in to mail letters and packages. “I’d like to hire someone else and be open a few more hours,” Gable says. “This could be key.”   Gable is one of the newest business owners to sign up with the U.S. Postal Service’s nationwide Village Post Office project, which is intended to help the imperiled federal agency save money while giving local entrepreneurs a boost. The USPS has 31,272 post offices across the country. Only about 6,000 generate enough business to cover costs. In May 2012, the USPS announced a plan to save $500 million by reducing hours of service at 13,000 rural branches. Photograph by Adam Golfer for Bloomberg BusinessweekThere are 31,272 post offices across the country. Only about 6,000 generate enough business to cover costs Hoping to minimize the inconvenience to customers, the Postal Service is encouraging coffee shops and grocery and hardware stores to provide limited mail services. They can sell stamps, ship flat-rate packages, and rent out post office boxes. More ambitious business owners can choose to offer all the mail handling services of a full-fledged post office—though that requires costly security measures to meet federal standards, including installing steel-lined walls to thwart mail thieves. The USPS expects to have 300 Village Post Offices around the country by this summer and many more in the future. “It’s a low-cost alternative for us, and it’s a win-win situation when you look both from a customer service aspect and a community aspect,” says Edward Phelan, the USPS’s vice president of delivery and post office operations.   Before the Civil War, the vast majority of post offices were located in country stores and taverns. “There were virtually no free-standing post offices,” says Richard John, author of Spreading the News: The American Postal System from Franklin to Morse. He says the government gave small business owners a share of their postal revenue, but no salary. Today they get even less. Gable says she receives $100 a month from the Postal Service. The main attraction for entrepreneurs, then and now, has been the prospect of getting more people through their doors. John says the postal service began erecting free-standing post offices after the Civil War when the public was more tolerant of federal construction projects.   One natural skeptic of the new push toward Village Post Offices is Sally Davidow, spokeswoman for the American Postal Workers Union, which represents 220,000 USPS employees. She questions whether newcomers like Gable are qualified to handle mail. “People need an experienced postal clerk who can answer their questions,” she says.   Gable’s customers don’t see her inexperience as an issue. On an April morning, the Finger Lakes Coffee House was filled with customers. Most said they still had boxes at the regular post office in town. (So does Gable.) But Will Smith, a retired Cornell University employee, said he liked taking his business to Gable’s place. “She has Wi-Fi, so you can bring your laptop, do your bills, and mail them here.”   Gable says she’s not seeing a ton of postal business yet. But she notes that the USPS recently cut the hours at Van Etten Post Office from five and a half to four on weekdays, and says if the government eventually closes it she’ll be the primary beneficiary. At the moment, she’s more concerned about getting the USPS to deliver on its promise to install a big blue mailbox on the sidewalk outside her shop. When people stop to mail a letter, they’ll see the sign over the door advertising her mini-post office inside. “That will entice more people to come in,” Gable says. “I mean, I drive around looking for those blue boxes.”   Perhaps she shouldn’t get her hopes up too high. Valerie Warner works at McDonough’s Valley Hardware in Keene Valley, N.Y., about five hours northeast of Van Etten. Her brother, David McDonough, the store’s owner, opened one of the first Village Post Offices in 2011 after the USPS closed the local government-operated one. Warner says sales haven’t increased much, though she’s not complaining. “It’s been great just having our post office back,” she says. The bottom line: The USPS wants businesses to sell stamps and mail packages in towns where the post office has closed or cut hours. Leonard is a staff writer for Bloomberg Businessweek in New York.

Inside Google's Secret Lab: From Boloomberg BusinessWeek

Photograph by David Paul Morris/Bloomberg

Sergey Brin wearing Google Glass

Features

Inside Google's Secret Lab

By Brad Stone

(Corrects to reflect that Edward Teller did not win a Nobel Prize; also corrects Astro Teller's relationship to Sebastian Thrun)

 

Last February, Astro Teller, the director of Google’s (GOOG) secretive research lab, Google X, went to seek approval from Chief Executive Officer Larry Page for an unlikely acquisition. Teller was proposing that Google buy Makani Power, a startup that develops wind turbines mounted on unmanned, fixed-wing aircraft tethered to the ground like a kite. The startup, Teller told Page, was seeing promising results, and, he added proudly, its prototypes had survived all recent tests intact.
Page approved Google X’s acquisition of Makani, which was being completed for an undisclosed amount at press time. He also had a demand. “He said we could have the budget and the people to go do this,” Teller says, “but that we had to make sure to crash at least five of the devices in the near future.”

VIDEO:  Page on What is Google X?

 

As the polymath engineers and scientists who work there are fond of saying, Google X is the search giant’s factory for moonshots, those million-to-one scientific bets that require generous amounts of capital, massive leaps of faith, and a willingness to break things. Google X (the official spelling is Google [x]) is home to the self-driving car initiative and the Internet-connected eyeglasses, Google Glass, among other improbable projects.
 

STORY:

Is This Google X's Plan to Wire the World?

The biggest moonshot of all may be the skunk works itself: With X, Google has created a laboratory whose mandate is to come up with technologies that sound more like plot contrivances from Star Trek than products that might satisfy the short-term demands of Google’s shareholders. “Google X is very consciously looking at things that Google in its right mind wouldn’t do,” says Richard DeVaul, a “rapid evaluator” at the lab. “They built the rocket pad far away from the widget factory, so if the rocket blows up, it’s hopefully not disrupting the core business.”
Since its creation in 2010, Google has kept X largely hidden from view. Over the past month, Bloomberg Businessweek spoke to many of X’s managers and project leaders, who work with abundant resources and few of the constraints that smothered similar corporate research efforts in the past. “Anything which is a huge problem for humanity we’ll sign up for, if we can find a way to fix it,” Teller says.
Illustration by Rami Neimi“Anything which is a huge problem for humanity we’ll sign up for”
Google X seeks to be an heir to the classic research labs, such as the ­Manhattan Project, which created the first atomic bomb, and Bletchley Park, where code breakers cracked German ciphers and gave birth to modern cryptography. After the war, the spirit of these efforts was captured in pastoral corporate settings: AT&T’s (T) Bell Labs and Xerox (XRX) PARC, for example, became synony­mous with breakthroughs (the transistor and the personal computer among them) and the inability of each company to capitalize on them.

VIDEO: Google X Keeps Low Profile at Google I/O

 

That was last century. NASA’s budget has been clipped by 11 percent since 1990. Companies are pulling back on basic research as well, preferring to buy disruptive innovation when they see it in startups. “I’m pessimistic,” says John Seely Brown, the former director of PARC. “It’s shocking how much research is no longer being done. We have no understanding of how fast China is catching up. I think we are a very complacent nation.”
Google X occupies a pair of otherwise ordinary two-­story red-brick buildings about a half-mile from Google’s main campus. There’s a burbling fountain out front and rows of company-issued bikes, which employees use to shuttle to the main campus. Inside one of the buildings, frosted glass covers the conference room windows. A race car tricked out with self-driving technology is parked in the lobby. The car doesn’t actually work; it was put there as an April Fools’ joke. Some of the hallway whiteboards are filled with diagrams of that multigenerational nerd fantasy: space elevators. Media outlets have speculated that Google X is working on such contraptions, which would involve giant cables that connect the earth to orbiting space platforms. Google X is working on no such project, but employees have embraced the concept. It keeps every­one guessing.

To read the full article, go to: http://www.businessweek.com/articles/2013-05-22/inside-googles-secret-lab

Stone is a senior writer for Bloomberg Businessweek in San Francisco. Follow him on Twitter @BradStone.

 

Consumer Electronics (From BusinessWeek) This Week

 

Dorsey at April's New Economy Summit 2013 in Tokyo

Consumer Electronics

Square Unveils an IPad Stand With a Twist

By Brad Stone

 

May 14, 2013

 

Square, the San Francisco payment startup run by celebrated Twitter co-founder Jack Dorsey, has equipped more than three million small merchants with its familiar white credit-card swiper attachment that plugs into smartphones and iPads.

The company has had considerably less success getting into larger restaurants and retailers that conduct business with traditional point-of-sale equipment such as the age-old cash register.

On Tuesday, Square unveiled plans to break into that massive segment of the marketplace with its second piece of hardware, called the Square Stand. The white, angular stand is designed to lock onto a checkout counter and snugly display a second- or third-generation iPad running Square’s point-of-sale application, Square Register. The device includes an industrial-strength credit-card reader and has three USB ports that allow it to connect to other point-of-sale devices such as barcode scanners, receipt printers, and cash boxes. “This opens the door to folks who didn’t think Square was for them,” says Dorsey. “This is for bricks-and-mortar folks running high volume stores.”

A swiveling iPad stand, even one as radiantly white and slickly packaged as the Square Stand, may seem a fairly trivial product announcement. But it represents something a bit more audacious than meets the eye. For the last three years, Square has been trying to change the way merchants conduct business by driving down credit-card processing fees and producing software that gives physical businesses the same kind of customer data enjoyed by e-commerce sites. Square’s target is the billion-dollar point of sale market, dominated by NCR (NCR), MICROS Systems (MCRS), and other established payment providers. Along with Square, tech companies such as PayPal (EBAY), Groupon (GRPN), and Google (GOOG) are competing to take a bigger part of real-world transactions, but no one has cracked the market in a significant way.

The challenge has been merchant inertia. Partly this is about the retailers clinging to such old standbys as barcode scanners and receipt printers set up in traditional check-out stands and partly it’s their  lingering notion that letting customers pay via mobile devices floating around their stores feels unprofessional. Square Stand is meant to solve all those problems by fixing the iPad into place at the front of the store, and then working with existing peripherals. “It takes the excuses off the table,” says Dorsey.

Meanwhile, Stand can also work for businesses that have already embraced iPads as payment devices but have been forced to come up with their own creative ways to affix tablets into place.

The Square Stand will cost $299 and will go on sale in July on the Square website and in Best Buy (BBY) outlets. (Apple (AAPL), which sells Square’s smaller readers, will not carry the device at launch.) The Stand will begin appearing on the counters of 15 merchants this week, including Blue Bottle Coffee outlets in San Francisco and New York.

One place the Square Stand could eventually appear is in Starbucks (SBUX) stores. The coffee giant invested $25 million in Square last year and its chief executive officer, Howard Schultz, sits on Square’s board. Others have wondered why the rollout of Square technology in Starbucks’s cafes has seemed so slow. Dorsey says Square already processes all of Starbucks’s credit-card transactions in the United States and is experimenting with ways to integrate its hardware into the cafes. He says Starbucks could make a good home for the Square Stand. “They want humans to be able to see their baristas’ eyes and we are working hard to help them with that,” he says.

Stone is a senior writer for Bloomberg Businessweek in San Francisco. Follow him on Twitter @BradStone.

Bloomberg BusinessWeek: Putting a Price Tag on Immigration Reform

U.S. Marine and newly naturalized American citizens take the Oath of Allegiance during a Naturalization Ceremony at the Jacob K. Javits Federal Building in New York, on April 19.

Immigrants

Putting a Price Tag on Immigration Reform

By Elizabeth Dwoskin

May 08, 2013

 

Very soon, Congress will assess the price of immigration reform. That is, lawmakers will come up with a tally, in dollars, of the sweeping immigration bill’s costs to taxpayers and the revenue it will bring in.

 

Even before the U.S. has officially scored the bill, the Heritage Foundation, a conservative think tank, has already calculated its own price tag for giving amnesty to unauthorized immigrants: $6.3 trillion over 50 years. Heritage comes up with its huge number by adding all the public services that naturalized immigrants could conceivably use. Politically, the number will accomplish what its authors likely intended: Garner press coverage and make many conservative lawmakers think twice about voting for the bill.

 

As a piece of research adding to the immigration debate, it makes some questionable assumptions. For one, the report projects that all 11 million undocumented immigrants living in the U.S. will choose eventually to become citizens—despite the fact that some will be disqualified or may not choose to endure the expensive, decade-long process the bill proposes they go through.

 

The dollar amount becomes inflated because the report factors in things that don’t normally go into scoring, says Douglas Holtz-Eakin, who was director of the Congressional Budget Office from 2003 to 2005. For example, the report factors in the cost of immigrants who become citizens using public roads ($476 per household, says Heritage). It also calculates the cost for the 4 million U.S. citizen children of immigrants attending public school, which Heritage deems “a direct and inevitable result of the unlawful immigration of the parents.” (The report doesn’t calculate the tax contribution of those children after they graduate and enter the workforce.)

 

Another reason Heritage thinks immigrants will be a tax drain is that the think tank assumes their incomes will rise only 5 percent after citizenship, though other economists predict they could rise between 10 percent and 15 percent. When Congress last enacted immigration reform, in 1986, incomes of immigrants who got amnesty rose 15 percent over three years. And when the Congressional Budget Office scored President George W. Bush’s failed immigration overhaul legislation six years ago, officials found that immigrants would contribute more in taxes than they collected in benefits: The 2006 bill would have boosted U.S. revenues by about $66 billion between 2007 and 2016 and would have increased direct spending by $54 billion.

 

“The assumption is that they’re poor and will always be poor,” says Benjamin Johnson, executive director of the American Immigration Council, a pro-immigration group in Washington, D.C., that has criticized the report. “The message is that these are the takers.”

 

“We are not picking and choosing numbers. On the contrary, ours is the only study that considers all government taxes and expenditures,” Heritage economist Robert Rector, who authored the study, said in an email. “The fact that unlawful immigrants will be a net drain on the tax base is common sense—you don’t even need a study for it. People with an average tenth grade education are not going to pay enough taxes to offset the benefits they receive.” (Rector’s co-author, Jason Richwine, the Washington Post reported today, also argued in his 2009 doctoral dissertation that immigrants with low IQs should be prohibited from entering the country. Heritage told the newspaper it had no association with Richwine’s earlier paper.)

 

When it’s the CBO’s turn to tally the official score, the numbers and assumptions—no surprise here—are likely to be quite different from Heritage’s. But that won’t make the task of coming up with a price tag any any easier. The big decision the CBO has to make is whether to look narrowly at the bill’s impact on the federal budget or examine the bill’s wider impact on the the economy as a whole. Of course, not all pieces of legislation need to be examined in this way, but one that potentially allows millions more people into the labor force kind of asks for it.

 

Then you get into some very difficult questions. To estimate something like naturalized immigrants’ tax payments, the CBO could take a stab at how many will start companies, how much money they will save, whether the balances of payment they send to family members back home will increase along with their rising incomes, and how soon they may be able to shift to higher-paying jobs they are excluded from now. One recent estimate by a left-leaning think tank, the Center for American Progress, takes into account a broader array of benefits and concludes that legalization with a path to citizenship could add $1.4 trillion to U.S. GDP over the next decade.

 

Between an approach that looks at immigrants as takers and one that maximizes all possible contributions immigrants could make to society, the latter is the one favored by economists, who tend to think that immigration will add jobs and wealth to the economy. Opponents of immigration reform will be disappointed to find that the CBO will likely adopt more of a macroeconomic approach. Which is why those opponents sought to get their numbers out first.

Dwoskin is a staff writer for Bloomberg Businessweek in Washington.

Small Business: BusinessWeek "Online Sales Tax"

Amazon's fulfillment center in Phoenix; the company is among those supporting the online sales tax measure

Financing

As Online Sales Tax Passes Senate, What's the Word on Main Street?

By Patrick Clark

 

Last night the U.S. Senate passed the Marketplace Fairness Act, which would require online sellers with more than $1 million in annual revenue to collect sales tax on transactions across state lines. Are Main Street shop owners hoping the essence of the bill makes it through the House of Representatives and is signed into law?

Depends on who you ask, though many businesses, large and small, and advocacy groups support it, as Karen E. Klein pointed out in January. Small Business Majority Chief Executive Officer John Arensmeyer says his group backs the bill: “We know from all the research we’ve done—not on this issue, but in general—that one of the fundamental things that small business owners believe in is a level playing field.” That sounds similar to the National Retail Federation, which has long championed the bill as a means to keeping brick-and-mortar businesses on level ground with online retailers.

Opposition to the bill has generally fallen along two lines. Anti-tax lobbyists, led by Grover Norquist’s Americans for Tax Reform, have criticized it as a new tax on consumers. E-commerce giant EBay (EBAY), meanwhile, has argued that the law would place undue compliance burdens on small Internet sellers and has proposed exempting businesses with less than $10 million in annual revenue from collecting sales tax from out-of-state customers.

Last month, National Federation of Independent Business spokeswoman Jean Card told me her lobbying group had a neutral position on the bill because its membership is divided.

It has been widely noted that the bill doesn’t introduce a new tax, but requires businesses to start collecting levies already on the books—with an estimate of $23 billion in annual revenue at stake. As I reported last month, the Senate bill would require states to provide businesses with free tax-compliance software to help manage the process of collecting out-of-state sales tax.

As for what happens next, the issue is headed for the House, where Richard Rubin reports it is unlikely to move fast. Still, he writes, House Republican leadership, including Speaker John Boehner (R-Ohio) and Majority Leader Eric Cantor (R-Va.), have deferred it to House Judiciary Committee Chairman Bob Goodlatte (R-Va.), who has not come out against the bill. “I am open to considering legislation concerning this topic,” Goodlatte said in a statement posted online last night, adding that he doesn’t believe the Senate’s bill is “sufficiently simplified yet.”

Clark is a reporter for Bloomberg Businessweek covering small business and entrepreneurship.