they made artificial fog for one amusement business and then found some other spooky customers in haunted houses and night clubs. how these entrepreneurs scared up new revenue streams. that and more coming up next on "your business." small businesses are revitalizing the economy, and american express open is here to help. that's why we are proud to present "your business" on msnbc.

hi there, everyone, i'm j.j. ramberg. and welcome to "your business." where we give you tips and advice to help your business grow. every halloween we always scare up a good small business story, from haunted houses in atlanta, to an entrepreneur who makes sofas out of coffins. well, today, we're taking you to meet witches in salem, and to hear about some entrepreneurs in nashville who were forced to innovate after getting a little smoke in their eyes. well, when the fog started to lift, they discovered a whole new hauntingly profitable customer base. ♪ >> halloween is definitely a all hands on deck, we're going full force, we've got extra staff in.

because during this time of year, halloween is a major part of our business. >> this time of year, it's tons of calls. it's calls, calls, calls, and calls. i like fog. it's kind of fun to blow smoke for a living. >> chris markgraf and adam pogue do blow smoke for a living. they manufacture their special formula of hyperallergenic smoke fluid which is used to supply the smoke machines that fill the haunted houses that creep you out at halloween. >> when we started the business, it was more of a necessity, for a family entertainment center. >> a necessity, because they worked at a family-run laser tag center which used fog. and it was something which triggered chris' asthma, smelled terrible, and irritated customers' eyes. >> i had some respiratory issues with the fluid we were using. so we set out to try and at least make a version that was,

for me, breathable. >> it was not that we were ever going to sell the product. it was just, can we make something that is better for the kids, and better for our employees, and better for us? >> with nothing on the market to solve these problems, they worked with a chemist to formulate their own pharmaceutical grade artificial fog-making fluid. >> we developed a product that was really cool. and, you know, for our use it was perfect. we didn't need it for anybody else. we just needed it for us. >> they never considered marketing it, until another laser tag owner named mike took notice. >> he said, who does your fog? this stuff's great. it's not burning my eyes, and where can i get this? oh, well, we make it. and he said, will you sell me ten gallons? oh, no, mike, here, just take some. and that guy went back and told everyone with a fun center and roller skating rink east of the mississippi river about us.

and so, from there, it just took off. and all of a sudden, we were taking fog orders quicker than we were booking parties for the fun center. >> at first, the fog business seemed to have limited potential for profit. >> i said, if we ever sell 55 gallons of this it will be a miracle when we were first starting it. all of a sudden we're getting ten times more calls in october than we do any other time of the year. why is that? >> that was a wake-up call. which they answered. by asking their customers one very simple question. >> well, what do you use it for? well, we're a haunted house. every haunted house uses fog. and it was just one of those -- wow, we didn't know that. the first guy that we were on the phone with looked at us and said, you've got to go to this trade show. >> the more they listened to the haunted house operators, the more new products they discovered they could manufacture. >> and so they began to tell us, well, hey, we want a ground fog that lingers a little longer than most ground fogs do.

because we're using it outside in graveyards. okay, so we went and designed an outdoor type ground fog. >> but ground fogs for graveyards wasn't all they discovered by attending that trade show. >> you'll be at a trade show, and we'll get haunted attractions. well, my cousin's a fireman, he uses tons of it. note to self, firemen use this. >> and so they went to all kinds of shows from shows for firemen and boat builders to sewer inspectors and sky writers. all of which became markets for their fog. >> you'd be at a trade show that's a bar and night club show and you'll hear oh, yeah, you know, my friend owns a bowling center and he uses a lot of this, too. you'll hear from a production guy that, oh, yeah, you know, hey, we need to get those out on the cruise ships. well, everybody knows cruise ships have incredible productions. just one leads to another and it's all done, from my perspective by listening to customers. >> that's when the froggy's founders found out that rock 'n' roll performers were particularly interested in the

allergy-free fog formula. >> we travel with our own hazer and fog, and you know, we traveled for years, trying different variety of fogs. ♪ >> craig felter, lead singer for the hearts is especially sensitive to the smells and irritants produced by typical fog-making machines. >> they all have this stench and as a vocalist, one, i don't like things to stink. and i don't like things to clog my vocal chords up. >> and he's not the only one. the business has come a long way from the early days, and the prospects seem bright. >> we grow by a couple hundred percent every year, or more. >> now, we didn't get into this in the story, but these innovators found other uses for their fog formula, too. you may be wondering why there's so many bubbles around here. that formula is in bubble machines and snow machines and that opened up even more revenue streams for them. so let's try to cut through the

fog or these bubbles with our board of directors today. rod kurtz is the executive editor of huffpost small business. and gene marks is a small business columnist for "the new york times" and the president of the marks group. >> set has never looked better. >> i'm not answering any questions until i get some champagne. >> well, we're almost done with it. you know what i love this story so much. it's one of my favorites. but one of the things i thought was so funny is they're like halloween, haunted houses. he never even thought of it. >> you know what's amazing, i see so many business owners that they stumble into their opportunities. you know, you've got to be pretty smart to take advantage of those opportunities, and those are the ones that succeed. but you know, people like, they think and they think and they think but it's the guy that kind of stumbles into it and sees the opportunity and goes after it, those are the guys that make it. what i liked the most about them is they stay focused on the same opportunity. they did not get distracted by other things to do. everything was fog based. >> yes. >> they found a way to extend the product. >> yeah.

so that they focused on the product, but not on the market. >> right. >> these are what i call better mouse trap entrepreneurs. i love, in a way they stumbled into it. if you listen to the beginning of the piece, it was because they were in this industry to a certain extent that they knew where the need was. and i think if you look at most successful entrepreneurs, chances are they cut their teeth in the industry, working perhaps for someone else, where they saw the cracks, they went, they swam upstream, that's why i love entrepreneurs. >> j.j., i have a client, these guys are great guys, they're entrepreneurs, and they make like plastics and film-type products but they're so entrepreneurial they're buying chocolate bars at a discount price so they can sell it somewhere else. they got a great deal on duct tape, a whole truckload because they thought they could sell that. >> you can always use duct tape. >> because they're entrepreneurs. but they get distracted from their core business. these guys, give them kritd, they are staying focussed. >> they're marketing to all of these different groups, right, firemen, and rock stars, and haunted houses, in some ways that's tricky. i mean it is the same product.

but you have to go and figure out, where do rock stars go? and with your do firemen go and that's time consuming. >> but you heard them say, we talk to our customers. i imagine when they went into these different markets, they said, you know, what do you need? what's the niche here? how can we better serve you? and yeah, i think logistically it can be difficult selling to a fire department versus a rock band. but you know, that's, i think, the fundamental message for any entrepreneur out there is you've got to listen to your customers. they're never going to steer you wrong. >> and rod is 100% right. you learn in economics 101, it costs so much more to acquire the new customer than to get revenue from your existing customers. they went after their,isting base. >> dance with the one that brung you. >> and it seems like the products sell themselves. it seems like. >> hey, everyone can use fog. >> we have. all day long we're using it here. more than 300 years ago, the witch trials in salem, massachusetts, bitterly divided its citizens. today, that has helped to infuse salem's booming tourism

business. but as we first told you awhile back, there are some small business owners that wouldn't mind if that witchy reputation magically disappeared. ♪ this could be almost any charming new england seaport. but, it's not. ♪ this is salem, massachusetts. home to the infamous witch trials of 1692. fast forward about 300 years, and today it's known as witch city. where the small business community has turned an ugly history into a commercial feeding frenzy. >> kind of a rule in salem is if there's a witch on it, you can sell it. >> i definitely think there are major reason of why people come here. >> look closely. you'll see witches everywhere. they haunt the streets, the police cars, the fire department, the newspaper, the high school band, and just about every street corner. >> witches are great business.

we turn a buck for this city every chance we get. and for ourselves. this is all about being successful. >> october is salem's busy season. and the merchants are gearing up to earn a hefty percentage of their revenue selling halloween fun. >> halloween is big business. over $5 billion is spent nationwide on halloween. and a good part of that is spent here in salem. in one month we do what other places do at christmas. ♪ >> tourism event promoter christian day is a modern-day wiccan or witch. he, too, is a part of salem's multimillion dollar halloween tourism industry. >> i charge $150 a ticket for my witch's ball. it's graded by ool city as one of the top ten halloween parties in america. i give people $150 worth of fun. >> businesses like bouchard's and kday's depend on salem's

witchy reputation. but lately a new group of entrepreneurs have arrived in salem. and they're challenging the tourist industry with their own vision. andy king and his wife came to open a artisanal bakery. catering to those not dependent on tourism. >> we looked at salem as a city trying to attract a new demographic rather than stay with things like witch shops and stuff like that. >> king considers himself part of a vanguard of specialty businesses serving this new population. >> we've had people come up to us and say, these are the types of businesses that's going to turn sigh lem around >> but not everyone thinks the city needs to be turned around. including the mayor. >> having visitors in town, and having the thriving downtown relies on an economy that's driven by visitors. >> most of these condo people that have moved into salem to tell us that we should no longer be the witch city are relatively

newcomers to salem. >> for every, you know, $1 that's spent by a tourist visitor, that generates $5 to the economy. whether it's by paying for a job or indirect benefits to the community. we know that by having active and vibrant retail stores we're increasing our commercial tax base. >> these people came here long after this was the witch city to tell us how we should change our city. but i'm going to tell you something, if i didn't like the smell of chinese food, i wouldn't move to chinatown. because you can't get away from it. this is the witch city. >> there's still more ahead on this halloween edition of "your business." we'll answer a question from the owner of a funeral home who wants to know how to get customers to spend more. and talk about scary? advice on how your business can avoid tech disasters. in 1966.

sammy's fish box.m cherf i opened the first sammy's back in 1966. my employees are like family. and, i want people that work for me to feel that they're sharing in my success. we purchase as much as we can on the american express open gold card. so we can accumulate as many points as possible. i pass on these points to my employees to go on trips with their families. when my employees are happy, my customers are happy. vo: earn points for the things you're already buying. call 1-800-now-open to find out how the gold card can serve your business. some would say that halloween is not a techie type holiday. however, many entrepreneurs have horror stories about losing files, or have an eerie feeling that they're being watched and

that something devilish is going on with their data. so in preparation for the witching hour, our next guest has some sneaky tricks to help you put any paranormal tech scares into their final resting place. dan ackerman is a senior editor at cnet.com. chock full of halloween. let's get to the issue. i am one of those people, those entrepreneurs who lost all my data. my hard drive crashed and it was a nightmare. >> and what did you do to prepare for that? >> nothing. >> you didn't. >> now i'm so prepared. now i back up my stuff all over the place. but i didn't. and i'd been running my company for a few years. it's crazy. stupid, stupid. so that goes to your first point, back up your data. >> that's one thing we always tell people to do. people say oh, yeah, i'm definitely going to back up my stuff. at the end of the day you're busy. you don't get to it. that's fine until something terrible happens. hard drives all will fail eventually. they're technical devices. life span, 100% of them will eventually die. >> so how do you back it up? >> i always say people should have almost a three-point plan.

you have the data on your actual computer in front of you, your laptop, your desk top. and then you should back it up to a local backup like a little external hard drive like this. that's easy enough. but if your house floods or if there's a fire or something, your computer is right here, your backup is five feet away. that's not going to do you a lot of good. if you have important stuff, make a third backup online somewhere, you know, what they call the cloud. and you can use a cloud service for this or you can just send yourself stuff via g-mail. or amazon will give you five gigs of free space to upload anything. >> are there any backups that you particularly like? >> this i-dive and mozi. it's almost a commodity business in a way. if you're just interested in making sure that your stuff is available. >> the beauty is that it does it automatically. >> a lot of the services do it automatically. or you can right-click on a file and say, back this up now. or some of them will do it every day at the end of the day. >> that's what mine does every day at the end of the day so i don't have to think. >> talked about this. use different passwords. >> that's the thing that's so hard to do, but it's becoming

increasingly important. you know, every website always tells you, you know, you have your user name for your pass word. whether it's your bank or ebay or itunes. use a different pass word. but it's so hard to remember them when they want to cap the letter and a number and no repeating numbers. i can't give you a formula. because everyone would figure it out. >> but maybe you have your own kind of formula. >> you come up with your own formula that works. and replacing "is" with 1s, everybody knows that already. >> beware of social hazard. you and i spent a lot of time talking about this today. >> we used to worry about viruses and malware and used to install all these different anti-virus programs. all the people who are out to do you no good on the internet figured out they don't need to be technological about it, they can be psychological about it. they get access to your accounts and your passwords, whether it's your bank account or your facebook account through phishing or social engineering. so they'll send you an e-mail that looks just like it came from ebay or paypal or your bank

or your credit card. oh, they just want me to logon and check something. okay. you enter your username and pass ward but you're not really on your bank's site. you're on a site that looks just like it. but it's a fake. >> so if you get an e-mail like that. >> the best thing to do, and this takes a little bit of extra time, and unfortunately that's sort of the security environment we're living in. don't click on a link in your e-mail program. open up your web browser, type in city bank, bank of america, ebay, facebook, whatever it is and logon directly from that so you know you're going directly to the website. you're not going to get misdirected along the way. >> we talked about facebook that says check to see who's looking at your profile. >> that's who they used to get a lot of people. if you look at something on facebook and a lot of apps want to have permission to access your facebook profile, and you usually say yes. if something looks a little funky, that could be someone wanting to take control of your facebook account. >> protect against internet blackouts. >> if you have to be online all the time, your internet service

is going to go out occasionally. there's a bunch of ways around that. in a pinch, if you have a mobile phone, a smartphone that will act as an internet hub, that's great. or you can get one of these little my fi boxes. most of kth, verizon, anybody will sell you one of these. it's a mobile hot spot. and any device within about 15 or 20 feet can get on this. it's using the same network as your phone. if your internet service is out or your phone still works, one of these should work. be careful who you give the pass word to. >> all right, dan. this is great. thank you so, so much. >> thank you. >> are you looking to use your smartphone or your ipad for a marketing strategy? well, here now are the top five mobile marketing mistakes to avoid courtesy of entrepreneur.com. number one, mismatching content. make sure that every link you send out actually works, and is suitable for mobile viewing. two, having no promotional

budget. just posting your app in an app store isn't enough. make sure you have some marketing budget to promote the initial launch and any updates you release later on. to releas updates later on. three, mobile devices are capable of tracking and collecting data that can be useful to personalizing your marketing measurements. four, ignoring the potential of voice. mobile marketing makes it easy for your customers to touch or click a phone number to call your business. include your number in all e-mails and on all websites. number five, taking privacy concerns lightly. make sure you and your tech providers follow all industry regulations for collecting and using and securing personal information. it's time to answer some of your business questions. rod and gene are here with their words of wisdom.

the first question comes from bev. >> what a cheery question. >> well, it's in honor of halloween. >> it's a deadly important issue. >> we can extend this out, how do you up sell your customers. they are buying the cheapest thing. how do she get them to do more. >> you don't want the mish to pass away -- >> oh, this is going to be a day. >> the funeral service is different, but not different than what a consulting business is. you lose a loved one, and the last thing you want to hear is a marketing pitch from a funeral director selling more services or products, and it has to be a genuine approach at the beginning of the consultation

letting you know what services or products are available, and at that point you leave it go. the hard sell on that business to me, i just don't think it works. >> it's different from a lot of businesses, but it's not that different fundamentally. you have to keep in mind, people are feeling vulnerable and on guard and don't want to get up sold, so i think i say to intrapreneurs you will win on service and value, and create the experience, and not make price a big part of the equation, and walk them through the process of what it will be, it's a special time for you and your family, here is what we have to offer from a service level. >> and also, so much about sales is getting somebody to like you, and in this case, you know, more than ever this very to like you and trust you. >> yeah, bedside manner. >> and this is a question about getting investors. >> what kind of percentage should we be looking at to give away to an investor and how do

you know if the percentage is right and how should we be thinking in terms of what could be brought to the table, not just in capital but expertise? >> it's all you have. this is literally all you have, you are building a company. when i first heard the question i thought about the movie "bugsy," and he was left with nothing. that should be an extreme cautionary tail. sometimes you make a deal with the devil to get the muna you wa -- it's -- >> let's give a solution. >> well, a couple ideas here. if you are looking for money, there is always debt. people lend you money and promise to pay them back. there are stock options based on if you hit certain levels of

profitability, and if you are looking for expertise, like the question he was asking a lot of intrapreneurs, they build a board of advisers, and people are happy to be involved in a start up. >> yeah, sometimes i joke about angel or vulture. the question you have to think about when you are talking about raising money, and a lot of people get swepted up and think i have to raise money, and it's probably a lot less than you think, and you are probably looking for a lot of money if you are thinking about giving parts of the business away. >> and you start bringing in outsiders and investors, you work for others and it's no different than having a job. you want to be careful before you give any equity away. >> as a solution, look for debt. next question, and it comes from ellen, and she rights an

online retailer must coordinate information from the shopping cart, payment gateway, fedex and quit books. >> my company sells products, but we always tell the way in the world of technology is nowadays particularly for small businesses, pick a vendor and go with them. if you are using a back end system from microsoft, those guys have tons of partners and tons of third-party products that integrate back with each other. some you may not like better than others, but pick a vendor and go with it. >> it's the halo affect, if you buy an ipod or iphone and then a mac. >> are they expensive? >> it has gotten cheaper than ever, but broadly the issue is should i be bogged down with

data entry. and you are asking yourself that question and you should not be. some of the stuff that you can easily have others, third parties cake care of for you, you should pursue that. >> and flagship is $3,000, and most products we come across, a few hundred bucks a user. >> yeah, all right. thank you guys so much. this was all great. spooky advice today. >> if any of you have a question for the experts, go to the website, the address is openforum.com/yourbusiness. or you can e-mail your questions and comments as well, yourbusiness@msnbc.com. rod and gene had helpful

advice in how to improve your business, now let's get great ideas from small business owners like you. >> you want to make sure you are with everybody with every step, and i am thinking about all the technical stuff. i am the owner of the business, and i amount one that wants to get paid and i want people to bring plans to me so i should be involved in every step of my web page. >> try to do as much as you can yourself in the areas of marketing, legal, accounting, or many of your dollars that you -- your profit margin will be eaten up by outside venders, so try to do as much in house as you can. >> resilience is key, keep moving and continue trying to grow and do as best as you can. that's all we can hope for. if it doesn't work out, continue trying.

do you want to test out what works and what doesn't work on your small business website? check out the website of the week. it runs tests on elements of your company website to see what visitors respond to and what they don't. it's better known as ab testing. when users log on to the site, there will be sent out different versions of it to see what garners the greatest number of clicks. you can try the service out for 30 days before choosing a business plan. to learn more about the show, click on our website. you will find all of today's segments plus web exclusive content with more information to help your business grow. and then don't forget to become a fan on facebook or follow us on twitter. next week we take a closer look at a phenomenon popping up all over the place.

>> do they represent the shortest difference between kerr use tea a curiosity than con tentd. >> we will have a beginner's guide to cue the codes, and whether or not they make sense for your business. remember, we make your business our business. shazi: seven years ago, i had this idea. to make baby food the way moms would. happybaby strives to make the best organic baby food. in a business like ours, personal connections are so important. we use our american express open gold card to further those connections. last year we took dozens of trips using membership rewards points to meet with farmers that grow our sweet potatoes