Brent M. Eastwood, PhD, Director of Business Advocacy, NM EDD

To launch a business in New Mexico, an entrepreneur needs a legal structure, business name, employer identification number (EIN), state registration, business license and other permits. As complicated as it sounds, it takes most entrepreneurs only a few days to obtain what’s needed.

Legal structure: Most businesses begin as sole proprietorships or limited liability corporations (LLCs). The sole proprietor buys assets in his own name, and all business profits, losses and deductions go on the owner’s personal tax return. The business owner is personally liable for the business’s debts, obligations and liabilities. Sole proprietors don’t need to register with regulators to establish themselves, but they should check with local and state tax authorities to ensure the business complies with applicable tax laws.

Name: The legal name of a sole proprietorship is the owner’s full name, even if the business uses another moniker. A partnership’s legal name consists of the partners’ surnames or whatever name the partnership chooses. Corporations and LLCs have more latitude to register a legal name with the state; a corporation’s legal name doesn’t need to mention the owners’ names. A company uses its legal name in all business conducted with government entities. The company’s owner can operate under a fictitious name; in New Mexico, he can do it without registering with the state for a trade name or trademark.

Employer ID: An EIN, or federal tax ID number, identifies a business to taxing authorities. An owner whose principal business, office or agency or legal residence is in the United States or its territories can apply online and receive the number immediately if she has a valid taxpayer ID number such as a Social Security number or individual taxpayer ID.

Combined Reporting System number: All New Mexico businesses need a CRS number from the state Taxation and Revenue Department, which uses it to track major business taxes. This number is your state tax ID. Apply for this number (ACD-31015) at any local tax office or online at https://tap.state.nm.us to receive a CRS identification number immediately; applying by mail takes up to two weeks. A business with an average total monthly tax liability greater than $200 for any combination of taxes on the CRS-1 form must report monthly; other businesses can report less frequently.

Business license and other permits: Business owners must secure a business license for about $35 at their municipal office, where they’ll learn about and obtain other necessary permits and licenses that apply to their business. Licensing businesses allows the city to regulate zoning, parking, signage and other aspects of running a business.

Employer Account Number (EAN number): Entrepreneurs with employees are covered by the New Mexico Workers’ Compensation Act, and the EAN identifies the employers for unemployment insurance purposes. Register first with the New Mexico Department of Workforce Solutions, then with a district office of the Taxation and Revenue Department for the worker’s compensation personnel assessment fee.

Laws change frequently, and business owners should verify legal requirements at local taxing authorities or through legal counsel.

For more information, visit www.gonm.biz or contact your local NM Small Business Development Center.

Download 223_Getting Down to Business in NM

Kim Blueher, Director of Lending, WESST

WESST is a statewide small-business development and training organization that works with many small-scale entrepreneurs who have never accounted for all the underlying costs of getting their product or service to market. Some haven’t asked themselves how to know they’re operating at a profit and how few sales they can make and still break even.

An example is a well-known ceramist who sought help from WESST because her healthy sales at arts and crafts fairs weren’t covering her basic living expenses. When WESST guided her through a price evaluation for her product, she discovered she was only charging about $2 more than what it cost her to make her ceramic dishes: She had neglected to add the time of her own labor to her costs.

Adding up the true costs

Most entrepreneurs are highly skilled and passionate about their work, yet many resist calculating the actual costs of doing business. If they did, they would realize they are operating at a loss.

Rather than blaming poor cash flow and trying to finance the business through credit card debt and small-business loans, the entrepreneur should first understand all production costs, including intangibles like time. He should then determine the appropriate price for the product or service — a tricky task, as pricing is an art and a science.

The variables to consider when setting price are competitors’ prices, the relative quality of a product or service, the convenience the product provides and customers’ emotional buying habits. If the price is too high, some customers will settle for something else, while others may be convinced the expensive product is a better one. Lowering the price sometimes generates larger sales volume, but if the price is too low, the business won’t be profitable.

Once an entrepreneur knows her costs and her potential price, she can set the break-even point and adjust the price based on expected volume to achieve profitability.

The best investment

WESST once worked with two women who wanted to open a dance studio. After performing a break-even analysis, the women realized they would need to conduct six or seven full classes each day just to cover their costs. This unrealistic scenario convinced them to change directions.

This illustrates how taking the time to truly understand the pricing model of a business is one of the best investments a business owner can make. Such financial savvy can help him navigate the rough waters of the economy and changing markets.

WESST supports hundreds of artists and craftsmen through workshops held at its New Mexico training centers in Albuquerque, Rio Rancho, Las Cruces, Roswell, Farmington and Santa Fe. It also supports clients through events such as this year’s Winter Craft Fair, where more than 40 New Mexico artists will offer their products at the Santa Fe Incubator, 3900 Paseo del Sol from 3 to 7 p.m. Dec. 14. For workshops, visit www.wesst.org and click on the events tab.

Download 218_WESST Helps Artisans Get the Right Price PDF

Monica Abeita, Regional Development Corp. for NNM Connect

New Mexico innovators will pitch their discoveries to a panel of experts — and get a shot at up to $10,000 in funding — at the next HD3 Discovery Day on Dec. 8 in Santa Fe. The event takes place at the Railyard District headquarters of the High Desert Discovery District (HD3), a nonprofit entity that helps entrepreneurs give their discoveries a better chance at success in the marketplace. Discovery Day is a collaboration of HD3 and the Northern New Mexico Connect program’s Los Alamos National Security Venture Acceleration Fund (VAF).

At its first Discovery Day in May, HD3 (www.hddd.org) received more than 20 applications from all over the state and selected 10 projects to present to a panel of seasoned entrepreneurs, business trailblazers, management professionals, investors and others involved with the HD3 Entrepreneurs’ Forum. Six of the most promising concepts moved forward with HD3’s assistance. For the December event, panelists will hear eight of the most marketable ideas. The deadline for applicants was Nov. 11.

“Discoveries are more likely to be positively shaped and generate wealth for New Mexico if  innovators have the opportunity to share, discuss and strategize about their challenges, opportunities and ideas with people who can provide experienced, unbiased, unvarnished and market-facing advice,” said Michelle Hoeft, who founded HD3 to match scientific and technical talent with the business and investor expertise residing in New Mexico.

Discovery Day presenters must have a clear and protected intellectual property path for their discovery and an understanding of the market need or problem the discovery seeks to serve or solve. Ideas must have a measurable potential to become a high impact product or high growth enterprise, and the innovator must be clear about what capital, expertise and other resources are needed to commercialize the product. He or she must be able to articulate what that capital would be used for.

Presenters have 45 minutes to explain their ideas and answer questions posed by panelists. All presentations are conducted in a private setting that allows the maximum protection of sensitive and proprietary business and technological information as well as the uninhibited exchange of ideas. All Discovery Day discussions remain confidential.

HD3 advisers have extensive experience in matching technology opportunities with market needs, Hoeft said. They are experts in product development, investment strategy, marketing and sales, management, valuations and exit strategies. Advisers also have connections to contacts and resources that can promote the most promising discoveries.

Co-hosts VAF and HD3 will award small investments of up to $10,000 to the most promising ideas. Entrepreneurs interested in participating in the next Discovery Day should visit www.hddd.org. For other opportunities, visit  www.nnmconnect.net.

Download 217_Partners Team Up on Entrepreneurs Discovery Day PDF

Monica Abeita, Regional Development Corp. for NNM Connect

Economic developers Robert Naranjo and Lucia Sanchez were pleased to see boutique wineries spring up along the high road to Taos. But when they discovered that grapes were being sourced from outside the immediate area, they jumped into action. With funding from Northern New Mexico Connect and the county of Rio Arriba, Naranjo and Sanchez helped organize local micro-growers – those with one quarter- to two-acre plots – into a grape growers association. Barely a year later, the group has received advice from multiple experts, pooled funds to order root stock in bulk and planted thousands of vines. In two years, when the vines reach maturity, the association plans to begin selling their combined harvest to local wineries.

Sanchez is president of the Greater Espanola Valley Community Development Corporation, where Naranjo works as network facilitator connecting businesses to one another to exchange ideas.  The two have assisted the development of many businesses, but this time is different. “In the process of discussions, I decided to jump in and take my own advice,” said Naranjo. Both Sanchez and Naranjo joined the 17-member cooperative association and are growing grapes on their own small plots of land.

Naranjo cites many benefits of working cooperatively with other growers. Most Rio Arriba County land holdings are between one and five acres, giving individual growers little leverage when selling their produce. A pooled grape harvest of perhaps thousands of pounds will give micro-growers a larger presence in the market. Growers also learn from one another and from speakers hosted by the association. The association has sponsored representatives from the USDA and other organizations to educate growers on techniques such as trellis construction, pruning and irrigation. Education is important because Naranjo estimates 70 percent of the association’s growers had never grown grapes before.

Association leaders researched the market by talking with local producers and they shared what they learned with members. From these discussions, growers decided to focus on Riesling, Malbec and Petit Syrah, the grapes producers said they would buy. Northern New Mexico’s cool temperatures, which slow grape maturation, yield grapes with high sugar levels. “Sugar level here is bar none,” said Naranjo, and the North’s sweet grapes can be used in limited edition wines or blended with grapes from other parts of the state.

“Growing grapes gives us the opportunity to put small parcels of land back into production and to protect our water rights,” said Sanchez. Landowners who do not use their allotted water are at risk of losing it in the future. Evidence of historic usage is said to provide ironclad rights.

Much of the progress made by the association is due to the hard work and enthusiasm of association members, propelled by funding from Northern New Mexico Connect and matched by Rio Arriba County. Northern New Mexico Connect is the principal small-business outreach arm of Los Alamos National Security LLC, the company that runs Los Alamos National Laboratory.

“Northern New Mexico Connect has planted the seeds for an important model of local agricultural production,” said Association President Tim Martinez.

Northern New Mexico Connect is hosting a celebration of northern New Mexico’s expanding entrepreneurial community on November 10, 2011 in Santa Fe. Entrepreneurs will be introduced to the resources available to assist their business and will meet other entrepreneurs and business owners. For more information about the event or programs, go to www.nnmconnect.net. For more information about the Northern New Mexico Micro Grape Growers Association, visit www.grapecoop.com.

Download 213_Funds Connect Growers PDF

Mike Mykris, Director, NMSBDC at Santa Fe Community College

A business’s legal name is usually that of its owner, though businesses often assume a made-up moniker that says more about what the business does than who runs it.

When the business is a sole proprietorship, its legal name is the owner’s full name, even if it does business under something else. A partnership’s legal name consists of the partners’ surnames or whatever name is assumed in the partnership agreement. Corporations and limited liability companies have a little more latitude to register a legal name with the state; their legal name doesn’t need to mention the individual owners’ names.

Whatever the case, a company uses its legal name in all business conducted with government entities, whether the company is applying for an employer identification number, filing tax returns or securing a license. The company’s owner can choose to operate under a fictitious name, and in New Mexico, he or she can do it without registering with the state.

Trade names

Companies frequently choose to conduct business under a doing-business-as name that gives customers an idea of what service or product the business provides. The name “John Smith, Paul Smith and George Smith,” for example, offers potential customers no clue about what the Smiths do for a living, but Smith and Sons Plumbing tells the world that this is a family-operated plumbing business. A fictitious name doesn’t even have to mention the owner at all; the Smiths could call themselves Northern New Mexico Plumbing to emphasize the territory they serve and the trade they conduct.

The Smiths can assume this name in New Mexico without registering the name with the state. In their interactions with government, “John Smith, Paul Smith and George Smith” is all the company needs to call itself.

Choosing a name

Naming a business can be more challenging than it appears. Because a name reflects the business’s identity, the time invested in inventing that name is well spent.

When brainstorming potential names, a sole proprietor or members of a partnership should consider how the name will appear on marketing materials and whether it’s easy to recall. They should do some research to make sure the name isn’t already being used in their area or industry. Businesses are frequently sued and forced to change their names for infringing on trademarked company names — even if the trademark isn’t registered.

Some businesses choose clever spellings, puns and other types of wordplay on the assumption it will make their company stand out from competitors. Such decisions should be made with care that the name isn’t perceived as offensive, ridiculous or even profane. Phrases and words that are clunky or hard to pronounce should be avoided. And even though it isn’t required in New Mexico, the business’s owners should take steps to protect the name they’ve spent time and energy creating.

Download 212_Names Matter to Business Identity PDF

Lloyd Calderon, Director, New Mexico Veterans’ Business Resource Center, and Director, VBOC

When Freedom Construction of Edgewood was hired by the U.S. Army Corps of Engineers to upgrade the electrical system at Conchas Dam, the job was the first federal contract the company had been awarded. One of the reasons Freedom’s owners, Mark Beasley and Steven Tenorio, got the $1.1 million job is because they know what many veteran-owners of businesses do not: Federal laws set aside 3 percent of federal contracts for businesses owned by veterans who were disabled during the course of their military service.

Given the chance to compete against much larger contractors, Freedom Construction exceeded expectations and is now proficient at obtaining and completing government jobs. The experience gained from the Conchas Dam project translated into other contracts not governed by the 3 percent rule; the firm was hired by the State ofNew Mexicoto build lunar landing pads at Spaceport America.

Beasley and Tenorio, who served in the U.S. Marines and U.S. Air Force, respectively, qualified their business as a Service-Disabled Veteran-Owned Small Business, making them eligible to compete under set-aside rules. They also got advice from the Veteran’sBusinessResourceCenter, a part of the New Mexico Department of Veteran’s Services.

Business resources such as these, which target the specific needs of veteran business owners, are now expanding, thanks to a grant from the U.S. Small Business Administration.

Recognizing that former soldiers can draw on the same commitment, dedication and courage that served them in battle to operate businesses that serve community needs and provide jobs to other Americans, the SBA funded 19 Veteran Business Outreach Centers.  The region six VBOC, which is located inAlbuquerque, serves veterans inNew Mexico,Texas,Louisiana,OklahomaandArkansas.

Advisors at the Albuquerque VBOC help entrepreneurs draw up plans and marketing strategies for the enterprises they want to start or expand. Counselors assist in identifying strengths and weaknesses of established businesses and startups, helping veteran-owners pursue contracts for which their companies are best suited.

The office also assists veterans with finding banks that offer low-interest Patriot Express loans designed to help veterans, and it educates federal contractors, purchasing agents and veterans themselves about the set-aside laws. The VBOC works with other resource providers to conduct workshops and offer services tailored specifically for veteran entrepreneurs.

Freedom Construction is just one of the 22,600 businesses owned by veterans – fully one out of seven of the small businesses based in our state. With 180,000 veterans living inNew Mexico, and the VBOC office centrally located to serve veterans statewide, that number is likely grow.

For more information, visit nmvboc.org or call 505-841-2956.

Download 206_Veterans Get Help in Business PDF

Monica Abeita, Regional Development Corp. for NNM Connect

When Taos-based Imagine Education received a Next Generation Learning Challenge Grant from the Bill & Melinda Gates and William and Flora Hewlett Foundations this summer, the award was not just a triumph for middle-school students struggling to learn math. It also marked an achievement for theNew Mexico programs that grow the state’s economy by helping small New Mexico businesses.

Imagine Education’s founders credit economic development initiatives with helping them win the grant, one of nineteen awarded nationwide for innovations in teaching literacy and mathematics. The grant will allow Imagine Education to pilot its educational math game, Ko’s Journey, in ten middle schools nationwide.

A Business Built on Needs

In 2002 when Imagine Education co-founder Scott Laidlaw began teaching at Roots and WingsCharterSchoolin Questa, students were testing in the 28^th percentile for math. Laidlaw, a former Appalachian State University professor, joined other teachers in experimenting with story-based curriculum. To teach ratios, handmade boats were placed on an oversized map that modeled the spice trade of the early 1600’s. “The kids loved it and wanted more,” said Laidlaw. “When test scores doubled, we knew we were on to something.”

A series of math games set in different historical eras followed. Math proficiency increased eighty percent over four years, but success was more immediately apparent when students continually asked “do we get to play the game today?”

In 2009, Laidlaw partnered with CPA Jennifer Harris to develop and market Ko’s Journey, one of the more popular games played by Laidlaw’s students.

Putting Math in Context

Laidlaw and Harris believe children have trouble learning math when concepts are taught in abstract terms with no relevance to daily life.  “We take a fundamentally different approach by using stories—one of the very oldest architectures of human learning and teaching,” Laidlaw said.

Ko, the female protagonist, reaches children of both genders but is exceptional at reaching girls who might not otherwise be interested in numbers. “Girls are often predisposed to dislike math,” said Harris, whose background is in corporate finance. “As a result we have less women in finance, science and engineering.” Ko’s Journey seeks to change that by tapping into girls’ verbal and emotional communication skills, enabling them to engage with the story and retain mathematical principles.

A Game that Everyone Wins

The success of companies such as Imagine Education demonstrates thatNew Mexico’s business-building resources can help turn ideas into viable businesses that benefit the state. Imagine Education received market research and coaching from Northern New Mexico Connect, the principle economic development outreach arm of the public-private partnership that operates Los Alamos National Lab.  Imagine Education was also awarded $100,000 from the lab’s Venture Acceleration Fund to expand its user base.  Economic development programs such as these are designed to help businesses reach critical levels where they can expand their markets or attract additional investments.

Scott Laidlaw and Jennifer Harris

For Imagine Education, capital arrived in the form of the out-of-state grant, which will allow the business to grow, more students to learn, and the state to build a wider platform for tax revenue and jobs. “Having LANL stand behind our product has made a huge difference in finding funding to get Ko’s Journey into schools, where it belongs,” said Laidlaw.

New Mexico teachers and school administrators interested in piloting Ko’s Journey, which uses the ideals of the Common Core Standards Initiative adopted by the New Mexico Public Education Department, can find more information at www.imagineeducation.org. Visit www.nnmconnect.net to learn about the business development programs used by Imagine Education. For information about other New Mexico business resources, visit www.financenewmexico.org.

Download 200_Grant Expands NM Education Success PDF

Jennifer Sinsabaugh, Operations Director, NM MEP

When Clovis-based Leslie Candy Company was purchased by Greg Southard in 2002, the 50-year-old company was using trusted manufacturing processes and recipes to create peanut patties, brittles and haystacks for distribution to supermarkets, convenience stores and specialty boutiques throughout theUnited States.  Southard invited New Mexico Manufacturing Extension Partnership into the organization to review how things were flowing on the manufacturing floor.

Today, Southard still uses the company’s savory recipes and traditional cooking methods, but he now runs a lean shop with streamlined operations. “New Mexico MEP came in, watched our processes and provided feedback and solutions,” said Southard. “Based on their recommendation, we implemented an incentive program for our frontline employees, which resulted in a production increase of 25 percent, while lowering overall operating costs. New Mexico MEP helped us to look at our processes in a new way,” he said.

New Mexico MEP is a non-profit organization that helps businesses increase profitability. Serving businesses throughout the state from its offices in Albuquerque, Roswell, Farmington and Las Cruces, New Mexico MEP brings together experts in government, not-for-profit organizations and industry to offer resources that help companies become more competitive.

Based on the premise that a lean operation is a profitable operation, New Mexico MEP helps key staff understand the principles of lean manufacturing. It offers workshops, on-site trainings and systems analyses.

Southard’s Leslie Candy Company benefited from applying Value Stream Mapping to its manufacturing operation. VSM creates a visual map of existing operations – the route that raw materials take to become a finished product – and compares it to a map of how things could be done more efficiently. It helps participants analyze a business’s manufacturing system to identify redundancy and waste, and determines the tools needed to implement improvements. Starting with the way a company acquires its raw materials, VSM seeks to shorten the time it takes products to get to consumers.

Value Stream Mapping is also used in administrative settings to eliminate unnecessary paperwork and processes. The same principles, when applied to a front office or bookkeeping department, can put the focus back on the customer by incorporating lean concepts.

Besides efficiency trainings, New Mexico MEP offers classes that teach supervisors how to relate to employees, including how to motivate, resolve conflicts, reduce accidents, decrease equipment damage and increase product quality and quantity.

Businesses can also utilize the Partnership for Success program, a free Internet-based library and email subscription service that provides technical background and business information.

Businesses may be eligible for funding from the New Mexico Small Business Assistance Programs of Sandia and Los Alamos National Laboratories. For more information or to verify eligibility, call 505-262-0921 or visit www.newmexicomep.org.

Download 199_Candy Company is Sweet and Lean PDF

Les Mathews, Mesa Capital Partners

Business owners who obtain outside equity – whether from family, friends or institutional investors – quickly learn money has strings attached.

Most outside equity providers want to get repaid over a reasonable period of time and at a very good rate of return. In exchange for providing capital, they obtain a piece of the company, thereby becoming business partners.

For a growing business, the advantages of this kind of capital are numerous. Equity significantly improves a company’s balance sheet and provides resources for hiring marketing and sales staff, developing new products, purchasing equipment, and other needs that can help the business grow.

But there are other important benefits too.  A strong cash position will make the company look better to suppliers, customers, and lenders, which can result in better credit terms and improved borrowing power. Equity also reduces the risk of failure because unlike a loan, funds do not need to be paid back on a fixed schedule, and there are no interest payments. Other factors being equal, a company that is financed with a lot of equity has a lower risk of failure than one that is financed with a lot of debt.

Family and friends are usually the first place business owners go when looking for equity investment. Family members and friends can act quickly and don’t necessarily require burdensome terms or time-consuming due diligence. But family investment can put stress on personal relationships. And other than the money they provide, family members and friends don’t usually bring any additional value to the business.

Professional investors, such as organized angel investors and venture capitalists, look at capital investment primarily from a business perspective. They want a significant return and will do a considerable amount of due diligence before investing to make sure they know and can mitigate the risks faced by the business.

The advantage of accepting money from these sophisticated investors is that they bring structure and experience to the business. They often have business or technical expertise, and they may have networks of contacts with banks, potential new customers and other resources.  As owners, they want to direct the company as members of the board of directors.

Sophisticated investors also assess their exit opportunities – the ways to get their money back with a good return on investment.  Since exit typically requires the sale of the company, institutional investors will research sales of similar companies in the market and be well informed about exit potential and sales prices. As a result, the business owner is likely to receive more money at exit for his share than if he had not taken equity investment.

Business owners who intend to grow their business rapidly; need capital, relationships, and other resources to do so; and are willing to sell the business down the road should seriously consider seeking sophisticated equity investors.

Download 195_Investors Bring Benefits Beyond Capital PDF

Monica Abeita, Regional Development Corp. for Northern NM Connect

When Scott Laidlaw and Jennifer Harris created Ko’s Journey, a game designed to teach math in middle schools, they weren’t sure how to get it into the marketplace. With help from MBA students participating in a summer internship program at Los Alamos National Laboratory, they are now better prepared. The students helped them target interested schools and made recommendations to market their product on the Internet.

Academia to Main Street

Each summer, MBA students from top-ranked business schools work at LANL to help scientists, small businesses and entrepreneurs find commercial uses for new technology and assist companies with business challenges. MBA students spend 10 to 12 weeks on work such as evaluating market potential of a product, assessing competition and determining where to find customers.

The 2011 class consists of five people studying for their masters degree in business administration: Rachael Allen and Justin Dewey of the University of New Mexico, Nate Mason of Purdue University, Ian Foti-Landis of Keck Graduate Institute and Jason Wakizaka of the University of California, Los Angeles. Dewey and Foti-Landis are returning to the program for a second year.

Business owners interested in obtaining assistance this summer should apply by 5:00 pm May 20. Selection is competitive, and proposals are chosen by the students. While proposals affiliated with the laboratory are evaluated first, students often select small-business projects.

Never too small

In 2009, students selected Sportartist, a Chama-based sports memorabilia business. The interns developed an in-depth analysis of the market and offered suggestions for increasing sales from the company’s Web site. Owner Jolene Jesse said the meetings were inspiring and gave her the confidence to try new ideas.

Interns also helped High Desert Discovery District (HD3), a startup non-profit organization headquartered in Santa Fe. HD3 strives to link new discoveries with experienced business professionals, enabling the development of high-growth businesses, jobs and wealth in New Mexico. Students helped Michelle Hoeft, HD3’s executive director, devise criteria for selecting companies it can assist and recommended procedures for working with the laboratories.

Real-world applications

LANL’s MBA program is administered through the Technology Transfer Division, which serves as a conduit for LANL collaborations with private industry. The division promotes sharing LANL technologies and discoveries with entrepreneurs willing to find commercially feasible, tech-based products that can benefit society as a whole. It concentrates on technology licensing, cooperative research and development agreements and special assistance for employees interested in starting a business based on their LANL inventions.

For more information about the MBA program, contact Shandra Clow at clow@lanl.gov. For application guidelines, visit www.nnmconnect.net and click on the May 20 deadline under Events.

Download 189_LANL Puts Students to Work for NM Businesses PDF