how are small businesses affected by the cuts? a mattress maker combat as sluggish economy by attracting buyers by expansion. and he owns several restaurants but found a way to keep hungry customers coming into all of them. at track through expansion, coming up next on your business. small businesses are revitalizing the economy and american express open are here to help.

that's why we're proud to present your business on msnbc. hi, there, everyone. welcome to your business, the show dedicated to giving you tips and advice to help your small business grow. america's small business owners are anxiously a waiting to see what i am pact the federal budget cuts known as the sequester will have on their bottom lines. the budget control act which was passed by congress and then signed by the president translates to $85 billion in cuts and spending that many have predicted these cuts will disproportionately harm small businesses. cuts in the defense budget may hurt the most. the sba says small businesses that supply defense contractors are already feeling the pinch. steven fuller is the director of the center for regional analysis

and testified before congress that shows small businesses will suffer major job losses. david rose is chairman and ceo of a collaborative platform for early stage equity and gene marks is president of the marks group and columnist for the morning times. great to see you all. there was so much talk about what will happen if we hit this point and now we have hit it. so, steven, you've written a lot about job losses because of the sequester. now that we're there, are you seeing anything happen? >> well, you have to look in several different places. many of these job losses will come later in the year. there are certainly some job losses that affect small businesses right now. but the big impacts will come from the payroll reductions that we'll see starting next month on the federal side and also on the private sector side, the federal contractors as they cut back. lots of small businesses who are suppliers and vendors who will be impacted. >> we've talked a lot about how

the sba has helped some small businesses with loan guarantees and that will be reduced. dunk that will have a big impact on the economy or no? >> i think we're overlooking where the big impact is and it won't be the primes and subcontractors. all of these companies have suppliers and vendors that don't realize they're dependent on public money. the spending or an accepts, the loss of that spending will have a major impact on on businesses. they're dependent on the retail sales. >> as i hear this, i think the recession was very hard on small companies. in essence here is something that may be taken away from you, but you have some warning. >> and there's 20 to 30 million small businesses in the country,

so tough to generalize for everybody. and there is no question what professor fuller is saying is right. there will be job losses. if you're in the d.c. area, you're going to be hit. that's an area where the government spends a lot of money. but i do take issue, though, when people say that all small businesses will be hit, i take issue with the fact that some small businesses aren't planning ahead. you're right, we've known this is going to be coming and the small guys that i know have diversified themselves a little bit. so i don't want to sound unsympathetic, but if your business is built entirely

around the u.s. government and you're just getting government payments for what you're doing and that's your only customer, i question whether you're really doing the right thing and being smart when you're running your business. you should be diversified. >> so what should these people be doing now? >> the first question is who is being affected. on the one hand if your business is servicing the federal government or a prime contractor, you're going to be in trouble. if you have the coffee shop right in front of the federal installation where they're furloughing people, you'll be in trouble. >> will there be any surprises? shoot people who are going to be affected by this know that they will be if they just pay some attention, ask the right questions?

>> what's going to happen is that in very isolated cases, some communities that are so dependent on federal spend, perhaps huntsville or hampton roads, they don't have a diversified economy. they are a one company town in many ways and there are others of these around military bases. those companies if they weren't prepared last year for this, they're going to be really surprised this year. there's just less spending. and we see it already as consumers, whether they're federal workers or contractors, or just sympathetic consumers, pull back on their retail spending. so there will be impacts in isolated areas and we can identify those. i think more broadly -- >> that's specifically the point. it is these isolated areas that are heavily dependent on the government in one way or another. this is not something that will have a devastating effect across

small business across america, the 20 million, 30 million businesses out there. it will hurt the economy or it will affect the economy, but this is not going to be a traumatic thing that will knock us over the cliff. >> and my business will be affected, as well. we have like 500 clients, a couple dozen that did work with the government, they buy technology services from us and those people will probe be cutting back on spending where me. so that incorrectly affects me. the only thing i can tell you is that like professor fuller said, if people are unprepared, that's not a good situation to be in. really smart business owners are looking ahead two to three years from now, they're trying to anticipate what's going to happen and making plans for that. so if you're unprepared for something like this, there has been plenty of time to prepare. >> all three of you guy, thank you so much. we certainly will continue to follow this closely because the effects haven't happened yet. the idea of cutting back is certainly not a new one for most small businesses. you'll find very few entrepreneurs who didn't go through some sort of budget crisis at some point this their company's life. and everyone deals with it

differently. we recently spoke to one small business owner who in the face of dropping revenue considered shrinking his business, but instead, he decided to expand. >> it was a big risk, a big financial risk, but thank goodness it's paying off so far. we could have stayed in one location, but there was a limit to how much we could grow there. >> it was an expansion that was more than 80 years in the making. >> we had a great name, great reputation. >> even in a down economy, he says he and his sister decided to grow their company, best mattress, from one location to two. >> we're a small custom mattress factory. we manufacture and sell to the public our handcrafted mattresses. >> reporter: the mattress making company, which his father and grandmother started in west columbia, a south carolina, with a showroom and factory, had slowed because of trouble in the housing market. >> the mattress business much like the furniture business is

tied in with housing. and so mattresses being an easily postponable purchase were not of the forefront of a customer's purchasing decision. >> reporter: instead of cutting back like so much other companies were doing, buddy was pro active, focusing on how to bring in more business. >> i sort of had to drag myself kicking and screaming knowing it's going to be difficult. >> reporter: with the factory operating at about 70% capacity, there was definitely room to grow. >> even though we had a centralized location from the factory, i said we really need another location to try to stimulate sales. i struggled with that for six months before we finally pulled the trigger. >> reporter: the new store which opened its doors in 2012 had to

meet shall specific criteria. >> there are mattress stores everywhere and they're all in cookie cutter box locations. we wanted a unique building with a lot of visibility and another key, a great neighborhood, great demographics. so you have to look at the demographics, the income level of the clients. >> reporter: what makes the columbia location desirable is that it's surrounded by local businesses. it didn't hurt that buddy could also negotiate a favorable lease. >> we both had to give a little. it was probably a little more than what i had originally wanted to pay and it was maybe a little less than the building owner wanted. but he felt like with our reputation, we'd actually bring some people to the center. >> reporter: while mattress stores typically don't get a lot of foot traffic, foot traffic was what they were counting on. might be to some increased online and phone sales. >> we had done zip code tracking, so we knew it was a good area. >> reporter: there was some

concern about poaching business from the company's home. the two facilities are only about ten miles apart. >> we felt like it was a good enough risk to pick up another enough business that it was worth doing the second location. >> reporter: the store managers say sales have balanced out. and they work with their customers to go to whatever location is more convenient. >> if it's a customer that i had over there coming over here, i just let them know when i'm going to be here and if they want to come in, fine. if not, come on over if it's more convenient. >> we have a lot of people that will not go to west columbia. they like to stay in their neighborhoods and they're so happy we're here. >> reporter: the company faced an unexpected dilemma when best mattress got a new look. >> reporter: but some customers actually thought a competitor had come to town. >> we earned that few people who saw the new logo here who worried that this was maybe a different mattress company. >> reporter: and then there were the clients who thought new location meant higher prices. >> we've had several who admitted to me they were just a few blocks away, but they thought they could save maybe $50 or $100 or several hundred dollars, so they went to the factory location.

>> reporter: and others still didn't know where they were calling. >> they will get confused sometimes and call here thinking they're calling west columbia and vice versa, but we try to help them no matter what location. >> reporter: so they invested in advertising on the website, newspaper ads and commercials to help ease concerns. >> we lad to do that for several months before people pine and he will got it that pricing, the quality, everything was the same. >> reporter: as buddy had helped, output has gone up. >> we're probably at 80%, 85% now. but we have a little bit of room. >> reporter: even though there was a failed expansion of best mattress near a local mall in the 1980s, buddy says this time it's different. >> we're in a different shopping environment with small businesses that are unique, eclectic. they won't all go out of business at the same time certainly like the big anchor tenant at the mall. so we're a little better off from that standpoint. >> reporter: the second location has been so successful that there is already talk about

expanding further. >> if you had asked me three months after this store opened, not only would i have said, no, we're not going to expand again, but as it's played out, as we've become smarter on how to market both locations, i think it's logical. >> reporter: and if buddy has learned anything, it's that this expansion was a risk worth taking. >> i just don't believe that you can cut your way it to profitability. i think you have to be aggressive. i think business owners need to look at maybe expanding and look at another location. it worked for us. maybe entrepreneurs know what it's like to go up against the competition, but what do you do when your business expands and suddenly you're competing against yourself? it's a unique situation and with it comes particular challenges. one entrepreneur has managed to work his way through some

potential pitfalls by learning how to strike a balance with his multiple businesses. >> we opened the bowling alley, we will have seven properties all of them about five, six blocks of each other. it's a challenge, but really important that we maintain the variation from store to store. >> reporter: elliott nelson is the biggest restaurant owner in downtown tulsa. since he opened his first establishment in 2004, nelson's been on a roll. >> we built it, looked around and said when is something else going to happen. and it wasn't happening very quick. so we decided we'd just try and do it ourselves. >> reporter: and that's why nelson made the decision to help revitalize downtown tulsa by expanding his offerings one at a time. >> we decided we need to fill in all these gaps.

we kept adding to it. >> reporter: the area historically wasn't much of a draw. and so some people had their doubts about nelson's plans. >> when we opened this location, a lot of people thought it was nuts. >> reporter: and build a strong foundation is what he did. >> it is very much if you build it, they will come. and for the most part, they have. >> reporter: if you look at a map of downtown tulsa, you'd be hard pressed not to come across one of nelson's establishments. if you start at fassler hall, it's just a short walk to the dilly deli. and nelson's newest adventure, the dust bowl lounge and lanes. and just about three blocks away is mcnellie's. and then almost across the street, el quapo's. and then the japanese restaurant and about six blocks away is the brady tavern. having so many spots so close together is quite a balancing act. but nelson has managed to make it work. a key part of the equation is making each spot unique. >> the menu is different, the atmosphere is different. i don't think -- a lot of peoples people don't know the

establishments are relate because each has a different feel. >> reporter: allowing each restaurant to have its own identity has given way to a strategic marketing decision. >> we promote each other's places, you know, amongst all the group. but i want each place to feel individual. i want to feel like its own entity and have its own personality. >> reporter: one major advantage of the layout is the ability to share resources. if needed, the company's employees can work almost anywhere. >> the restaurants function the same, we have the same point of sale system. so any one of our managers can go from one restaurant to another and know how to navigate through the point of sale system. >> reporter: despite nelson's diversified company, he admits his business has had its own growing pains. >> to a degree we're our own competition, but the flip side is we're our own competition.

>> still to come, where is the money? a new funding method where investors get a share of revenue instead of equity in the company. and the controversy over working from home. is telecommuting good or bad for small business? we've all had those moments. when you lost the thing you can't believe you lost. when what you just bought, just broke. or when you have a little trouble a long way from home... as an american express cardmember you can expect some help. but what you might not expect, is you can get all this with a prepaid card. spends like cash. feels like membership.

we try to find places to go to find funding for your company. today we're talking to the co-founders of bolster, a small business funding platform where in exchange for someone's investment, the company pays out a portion of revenue over a period of time. great to see both of you. and i think this is such an interesting idea. but let's go backwards a little bit and just explain to me how it work. i'm company abc, i want to get fund. i can't get a loan from a bank. i come to you guys. what happens? >> the first step is for a business to come to our platform, create an account. we do some initial checks to make sure that they have at least one to two years of historical revenue. our focus is really the main

street brick and mortar business looking for anywhere there $5,000 to $100,000 in working capital or growth capital. once they fit our criteria, they can really share their story with people from their community. so we ask some tangible questions that really garner that feeling. give us a summary of what you're looking to accomplish. what project are you looking to build and how investors raising that capital will help you do that. we ask for basic financial information, high level top line revenue. >> so i'm a bookstore and i need to raise, you know, $20,000. i write this heartwarming story about why i need to raise it, i show to my community, my favorite customer says, okay, i want to give you $5,000. and in exchange, i say to him, okay, well over the next three years, you'll get a percentage of my revenue. right? >> exactly. so when we were conceptualizing the platform, we wanted to speak to small businesses and create an investment structure that really made sense for their businesses. so with a revenue sharing agreement, a business agrees to in exchange for the upright capital that they raise, they

agree to share a percentage of top line revenue for a defined period of time. >> so can this get risky for companies? because i have money from you. i have to give you my revenue. that means that i can't increase my expenses because i have this revenue top line to pay out. with equity it's fine. i can spend as much as i want, but here i owe you a portion of my revenue regardless of my expenses. >> right, right. that's something we talk to a lot of small business owners about. the best way to look at it is similar to a loan, for example. if that business is seasonal or cyclical, they have a bad month or quarter and they still have to maintain those payments on that debt which can put that business out of business. we give them the ability to create a deal structure on their own with custom deal terms. so they can share a percentage of future sales based upon the projections and figure out, can my -- after i share this revenue, what do my gross margins look like and what's the implied return on investment. >> the thing to remember here is

we're dealing with main street small businesses so they don't have the growth attributes to go to a private equity fund or vc fund that will invest in equity product, right? with a revenue sharing agreement we've created something that provides liquidity to investors involved. they are paying out a percentage of revenue based on performance of business to investors so it aligns their interest and incentivizes all investors to get out there, spread the word about what that business is doing, tell other folks to shop there and give them their business as well. >> what's the term? >> usually one to five years, depending on what the business is looking to raise and what gross profit margins are. we give them the tools to figure that out in a simplistic way. >> it's a negotiation between me and my investors? >> the way it works now the small business owner has the ability to set their own terms. >> got it. >> what the tools do for them is

calculate what the implied rate of return would be for their investors. if the doesn't make sense, we won't get funded. we provide them with tools and resources to derive a structure that makes sense looking at forward projections. >> thank you so much for sharing information about your company. i think it's really interesting. >> thank you. >> thanks for having us. going through your e-mails can take up a lot of time each day, so if you need time to do other things, like most of us do, here are five ways to thin out that inbox courtesy of informationweek.com. one, get rid of group e-mails. save yourself filtering through a slew of replies that are usually pointless of redundant. watch out for auto correct. the e-mails can add up if you have to send up follow-up replies because your first note didn't make sense so think twice before hitting send. number three, get up. if you sit two desks from someone, don't send them a note when can you talk to them in person.

ease up on manner. stop sending so many pleasantries to coworkers. no one needs another reply says "thank you" or "no problem." educate your employees. tell your staff exactly what kind of e-mails can you do without so they stop sending them your way. it's time to answer some of your business questions. david and gene are with us once again. before we get to viewer questions, marissa mayer at yahoo! said, no more working at home. have you to come into the office. i want to know your opinion, david? >> she's right. you have to run a business with whatever it takes to make the business function successfully.

as a small entrepreneur, i've had people work from home, i've had people work from remote offices, eye had contractors -- i've tried this every which way. sometimes it works and it's appropriate and sometimes it doesn't. it seems what has happened at yahoo! is this culture where a lot of people where it wasn't absolutely appropriate began to work at home and off-premises and take advantage. she's cleaning up the ship. >> you have a company where everyone -- >> i run the world's most dysfunctional company. i have ten people. we closed down offices, everyone works at home. we're a virtual server. when i saw marissa mayer was saying, i would be the last person to agree with her but she's right. our company, as good as we are, we never get together with each other, maybe once a year as a group. we talk to each other on the phone -- >> your company's doing well. >> the question is, look, i'm saving money on rent. i don't have people coming into an office and all of, that but am i missing out opportunities? if we were together would we be

collaborate, coming up with ideas, innovating that might created revenue and opportunities with clients. i think to myself, she does have a point. having said that, we can't deny it's 2013. some people with expertise and value you want to bring in and they may not be near you. there's plenty of great technology -- >> bottom line, as with most things in business, it's complicated. >> in my company we have silos, they can do their job by themselves, they can work at home. if you have to interact with each other, it's easier to have them do it at here. you miss the creativity and the ease -- >> i was walking around at msnbc. there's a huge room with all the producers and people in one place and listening to each other and helping and collaborating. that makes a difference.

>> let's move on to the next question about trade shows. >> do you think trade shows are still relevant? >> the trade show industry would like us to answer yes. what do you think? >> i speak at a lot of trade shows and i go around the country. i'm a huge fan of trade shows. if they're done right, if you put the right effort into, it you'll get something. you should be working the floor, you really have to jump into it, if you're that kind of person and make that kind of investment. like anything else, you get into it -- you get out of it what you put into it. >> what do you think? >> they are absolutely relevant with ellipses but they would like you to take out a 40 by 40 thing and booth staffers and that doesn't make sense. i've been there with large companies with large booths and nothing's happening. but a lot of times you learn off the floor and with your customers and peers. doing trade shows economically is extraordinarily practical. >> one of our producers is going to south by southwest. he met someone who books a table

for ten every single day and he gets people to come there and meet him. he says, everyone that would take me eight weeks to meet, i can meet them around a table. >> the biggest thing about trade shows, i have to say is you're going to spend all this money. you're going to have 10,000 drinks while you're there and the most important thing to do is the follow-up. >> follow-up. >> absolutely. number one hit about trade shows is you come back with 800 contacts, you have a dozen business cards in your pocket, and you put it in a drawer and forget about it. if you double up, you will triple your outcome. >> thank you so much. appreciate it. and if any of you out there have a question for our experts all have you to do is go to our website. the address is openforum.com/yourbusiness. hit the ask the show link to submit a question for our panel.